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 spending variance for plane operating costs in May would be closest to:
A)$810 U
B)$6,352 U
C)$810 F
D)$6,352 F

Question

Quizplus · Accepted Answer

It is mentioned that the budgeted cost was $32,500 and the actual cost was $31,690. Therefore, the spending variance is $810 unfavorable (actual cost is less than the budgeted cost which is unfavorable). Hence, the correct option is C.

Bobe Air Uses Two Measures of Activity, Flights and Passengers