Lost Airlines uses two measures of activity, flights and passengers, in the cost

Question

Lost Airlines 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 $40,570 per month plus $2,737 per flight plus $11 per passenger. The company expected its activity in September to be 68 flights and 208 passengers, but the actual activity was 66 flights and 206 passengers. The actual cost for plane operating costs in September was $240,350. The activity variance for plane operating costs in September would be closest to:

$5,452 F

$5,496 U

$5,496 F

$5,452 U

Explanation / Answer

Calculation of the Activity variance for operating Costs Activity Variance = Budgeted Cost- Actual Cost Activity Variance = (68-66)*2737+(208-206)11 5474+22 5496 The Activity Variance is 5496 U The correct option is B. 5496 U

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