Question

Sterr 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 $49,340 per month plus $2,635 per flight plus $2 per passenger. The company expected its activity in January to be 73 flights and 191 passengers, but the actual activity was 75 flights and 193 passengers. The actual cost for plane operating costs in January was $246,440.

The plane operating costs in the planning budget for January would be closest to:

a. $247,351

b. $246,440

c. $239,868

d. $242,077

Answer 1

$222,367.00

Step-by-step explanation:

The budgeted cost function=$49,340+$2,365X+$2Y

X is the number of planned flights

Y is the budgeted number of passengers

In the budget for January X was 73 while Y was 191

Hence the total budgeted operating costs could be ascertained by substituting for the values of X and Y in the equation above as shown below:

total budgeted operating costs =$49,340+($2,365*73)+($2*191)=$222,367.00

Apparently the options do not have $ 222,367.00 as one of them which implies that the correct option is missing out.