Sekuterski 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 $45,700 per month plus $2,892 per flight plus $4 per passenger. The company expected its activity in November to be 81 flights and 283 passengers, but the actual activity was 80 flights and 282 passengers. The actual cost for plane operating costs in November was $286,360. The plane operating costs in the flexible budget for November would be closest to:
A)$286,360
B)$277,614
C)$281,084
D)$278,188

Question

Quizplus · Accepted Answer

The flexible budget cost is calculated using the actual activity levels: $45,700 + ($2,892 * 80 flights) + ($4 * 282 passengers) = $278,188.

Sekuterski Air Uses Two Measures of Activity, Flights and Passengers