27. Bluemel Air uses two measures of activity, flights and passengers, in the co

Question

27. Bluemel 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 $43,670 per month plus $2,879 per flight plus $10 per passenger. The company expected its activity in December to be 85 flights and 281 passengers, but the actual activity was 90 flights and 278 passengers. The actual cost for plane operating costs in December was $314,740. The plane operating costs in the flexible budget for December would be closest to:

305,560

$314,740

$308,324

$291,195

Explanation / Answer

The plane operating costs in the flexible budget for December=43670+(90*2879)+(278*10)= $305560 Option 1 is correct

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