Bobe 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 $44,580 per month plus $2,390 per flight plus $8 per passenger. The company expected its activity in May to be 68 flights and 211 passengers, but the actual activity was 71 flights and 210 passengers. The actual cost for plane operating costs in May was $215,140. The plane operating costs in the flexible budget for May would be closest to:
A)$215,950
B)$208,788
C)$215,140
D)$217,999

Question

Quizplus · Accepted Answer

The flexible budget for plane operating costs in May would be:Fixed costs: $44,580Variable costs: $2,390 per flight x 71 flights + $8 per passenger x 210 passengers = $171,370Total cost: $44,580 + $171,370 = $215,950

Bobe Air Uses Two Measures of Activity, Flights and Passengers