Thomasson 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 $36,120 per month plus $2,034 per flight plus $1 per passenger. The company expected its activity in April to be 72 flights and 222 passengers, but the actual activity was 71 flights and 227 passengers. The actual cost for plane operating costs in April was $179,040. The activity variance for plane operating costs in April would be closest to:
Answer : $ 3750 F
working notes for the above answer is as follow
We have provided with the information as follow
The cost formula for plane operating costs is $36,120 per month plus $2,034 per flight plus $1 per passenger
cost formulla= $ 36,120 + 2034 X + 1 Y
Where,
x = No. flight
y= No of paasanger in the flight
The company expected its activity in April to be 72 flights and 222 passengers
Expected cost formaulla is as follow
= $ 36,120 + 2034 (72) + 1 ( 222)
=$ 36,120 + 146448+ 222
=$ 182790
The actual activity was 71 flights and 227 passengers
The actual cost for plane operating costs in April was $179,040.
activity variance for plane operating costs in April would be as follow:
= Expected – Actual
= $ 182790 – $ 179040
= $ 3750 F
