Question

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 $41,490 per month plus $2,839 per flight plus $23 per passenger. The company expected its activity in August to be 101 flights and 313 passengers, but the actual activity was 104 flights and 316 passengers. The actual cost for plane operating costs in August was $265,190. The plane operating costs in the planning budget for August would be closest to: Multiple Choice $265,190 $335,428 $344,014 $324,110

Answer 1

$335,428

Step-by-step explanation:

The computation of the plane operating cost is shown below:

Plane Operating Cost = Fixed cost + (Variable cost per unit × quantity) + (Variable cost per unit × quantity)

= $41,490 + ( $2,839 × 101 flights) + ($23 × 313 passengers)

= $41,490 + $286,739 + $7,199

= $335,428

We only considered the planned activity as we have to compute the plane operating cost for the planning budget