Question

Loughry 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 $530 per month plus $114 per job plus $16 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 October to be 25 jobs and 234 meals, but the actual activity was 20 jobs and 233 meals. The actual cost for catering supplies in October was $6,600. The catering supplies in the flexible budget for October would be closest to:A) $6,600B) $5,699C) $6,538D) $7,124

Answer 1

Answer:

The correct option is D. $7,124

Explanation:

To compute the catering supplies amount, the following items need to be considered. along with this, the computation is also shown:

= Catering supplies + Job cost + meal cost

where,

Catering supplies are $530 per month

Job cost = Per job cost × expected number of jobs

              = $114 × 25 jobs

               = $2,850

Meal cost =  Per meal cost × expected number of meals

                 = $16 × 234 meals

                 = $3,744

Now put these values to the above formula

So, the answer would be equal to

= $530 + $2,850 + $3,744

= $7,124

The actual activity is not consider. Thus, it is ignored.

Hence, The catering supplies in the flexible budget for October would be closest to $7,124

Therefore, the correct option is D. $7,124