Ostler Hotel bases its budgets on guest-days.The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

Question

Ostler Hotel bases its budgets on guest-days.The hotel's static budget for April appears below:  The total overhead cost at an activity level of 9,700 guest-days per month should be:

Quizplus · Accepted Answer

To find out the total overhead cost at an activity level of 9,700 guest-days per month, we need to use the formula for flexible budget:

Flexible budget = static budget + (actual activity level - static activity level) x budgeted variable cost per unit

In this case, the budgeted variable cost per guest-day is $22.50 ($90,000 total variable cost divided by 4,000 guest-days), and the actual activity level is 9,700 guest-days per month. So the calculation would be:

Flexible budget = $547,500 + (9,700 - 4,000) x $22.50
Flexible budget = $547,500 + 5,700 x $22.50
Flexible budget = $547,500 + $128,250
Flexible budget = $675,750

Therefore, the total overhead cost at an activity level of 9,700 guest-days per month should be $223,950 (Option C). 11ea7998_5ca1_3566_911b_6fa8c69ec2f4_TB2627_00_TB2627_00

Ostler Hotel Bases Its Budgets on Guest-Days