Orange Catering uses two measures of activity, jobs and meals, in the cost formu

Question

Orange 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 $430 per month plus $99 per job plus $10 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 March to be 12 jobs and 126 meals, but the actual activity was 9 jobs and 124 meals. The actual cost for catering supplies in March was $2,550. The catering supplies in the planning budget for March would be closest to:

Explanation / Answer

d) $2,878

430+99*j+10*m is our cost function

projected actual cost based on actual data is j=9 jobs and m=124 meals
would be 430+99*9+10*124=2561 but the actual cost was 2550

but we were asked for the planning budget which is based on expected data (because when we planning we do not know what the actual data will be) The expected activity is j=12 jobs and m=126 meals

that means planned cost based on expected data is
430+99*12+10 *126= 2878

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