Question

Hirons 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 $56,840 per month plus $2,874 per flight plus $13 per passenger. The company expected its activity in November to be 86 flights and 255 passengers, but the actual activity was 89 flights and 257 passengers. The actual cost for plane operating costs in November was $305,100. The spending variance for plane operating costs in November would be closest to:

Answer 1

Answer:

$ 10,867 F

Explanation:

Actual results$305,100

Flexible budget [$56,840+ ($2,874× 89) + ($13 ×257)]

$56,840+$255,786+$3,34= $315,967

Spending variance $ 10,867

($305,100-$315,967)

The spending variance for plane operating costs in November would be closest to $ 10,867 because the actual expense is less than the flexible budget, which makes the variance favorable (F)