Question

42)Groupe Air uses two measures of activity, flights andpassengers, in the cost formulas in its budgets andperformance reports. The cost formula for plane operatingcosts is $48,840 per month plus $2,381 per flight plus $7 perpassenger. The company expected its activity in October to be63 flights and 293 passengers, but the actual activity was 61flights and 298 passengers. The actual cost for plane operating costs in October was $199,070. The activity variance for plane operating costs in October would be closest to:
A)$1,824 F
B)$1,824 U
C)$4,727 U
D)$4,727 F
Question Details
Difficulty : 1 Easy
AICPA : BB Critical Thinking
AICPA : FN Measurement
Accessibility : Keyboard Navigation
Type : Static
Learning Objective : 09-02 Calculate and interpret activity variances.
Learning Objective : 09-05 Prepare a planning budget and a flexiblebudget with more than one cost dr
null : Question Focus: Quantitative
Bloom's : Apply
Accessibility : Screen ReaderCompatible
Gradable : automatic
Topic : Activity Variances
Topic : Planning and Flexible
Budgets with Multiple Cost
Drivers

Answer 1

The activity variance for plane operating costs in October would be closest to $4,727 F .

Option D is correct.

Activity variance :

Activity deviation is the difference. Between a revenue or cost item in a variable budget and the same item in a static plan budget. Performance deviation arises only from the difference between the actual service coverage of the flexible budget and the expected service coverage of the planning budget.

Evaluating activity variance :

Plane operating costs in planning budget    :

                                                    = 48840+(2381 × 63)+(7× 293)

                                                                 $ 200894

Less: Plane operating costs in flexible budget

                               = 48840+(2381 × 61)+(7× 298)

                                          $196167

Activity variance for Plane operating costs =  $200,894 - $196,167

                                                                      =  $4,727.

   

Activity variance is $4,727 F .

What is the purpose of activity variance?

Differences in activity are important for managerial decision-making. This is the difference between static and flexible budget cost items. This shows the cost difference between planned and flexible budgets.

Learn more about activity variance :

brainly.com/question/29704119

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