Standahl Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $39,590 per month plus $2,649 per flight plus $4 per passenger. The company expected its activity in August to be 82 flights and 294 passengers, but the actual activity was 85 flights and 297 passengers. The actual cost for plane operating costs in August was $255,690.The plane operating costs in the planning budget for August would be closest to:
A) $255,690
B) $257,984
C) $265,943
D) $246,666

Question

Quizplus · Accepted Answer

The planning budget for plane operating costs is calculated based on the expected activity levels. Using the cost formula provided ($39,590 per month + $2,649 per flight + $4 per passenger), and the expected activity for August (82 flights and 294 passengers), the calculation is as follows: $39,590 + ($2,649 * 82) + ($4 * 294) = $39,590 + $217,218 + $1,176 = $257,984.

Standahl Air Uses Two Measures of Activity, Flights and Passengers