Question

Lynne Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $480 per month+ $91 per job+ $14 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in June to be 10 jobs and 79 meals, but the actual activity was 14 jobs and 77 meals. The actual cost for catering supplies in June was $2,970. The catering supplies in the flexible budget for June would be closest to:_______.

a. $2,496.
b. $2,970.
c. $2,832.
d. $3,494.

Answer 1

The catering supplies in the flexible budget for June would be closest to $2832

Step-by-step explanation:

Cost is calculated as

Fixed cost + (Variable cost per unit1) + (Variable cost per unit2)

Where Fixed Cost = $480

There are $91 per job for 14 Jobs

There are $14 per meal for 77 meals

Expected activity in June = 10 jobs and 79 meals.

So,

Variable Cost Per unit 1 = $91 * 14

Variable Cost Per unit 2 = $14 * 77

Total Cost = $480 + ($91 * 14) + ($14 * 77) = $2,832

Hence, the catering supplies in the flexible budget for June would be closest to $2832

Answer 2

$2970

Step-by-step explanation:

The cost formula for catering = $480/month + $91/Job + $14/meal.

Expected: 10 jobs + 79 meals = 10 * $(480) + 77 * $(14) = $4800 + $1078 = $5878.

Catering bill for the month = $2970

Margin = $5878 - $2970 = $2908