Farver Air uses two measures of activity, flights and passengers, in the cost fo

Question

Farver Air uses two measures of activity, flights and passengers, in the cost formulas in its flexible budgets. The cost formula for plane operating costs is $44,420 per month plus $2,008 per flight plus $1 per passenger. The company expected its activity in May to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277 passengers. The actual cost for plane operating costs in May was $199,650. The spending variance for plane operating costs in May would be closest to: A. $7,695 U B. $7,695 F C. $5,691 F D. $5,691 U Please show me how to work it, not just the answer, Thanks so much!

Explanation / Answer

Standard Spending would be: 44420 + 2008*81 + 277*1 = 207345 Spending Variance = 199650 - 207345 = 7695 (F) Option B is correct. Thanks, Aman

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