Standahl Air Uses Two Measures of Activity, Flights and Passengers

question 234

Multiple Choice

Standahl 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 $39,590 per month plus $2,649 per flight plus $4 per passenger. The company expected its activity in August to be 82 flights and 294 passengers, but the actual activity was 85 flights and 297 passengers. The actual cost for plane operating costs in August was $255,690.The activity variance for plane operating costs in August would be closest to:

• A) $2,294 F
• B) $7,959 U
• C) $7,959 F
• D) $2,294 U

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Definitions:

Cash Account

An account that reflects the amount of cash a company has on hand, which includes currencies, checks, and balances in bank accounts.

Raw Material

Basic substances in their natural, modified, or semi-processed state used to produce goods and services.

Standard Costs

Predetermined costs for materials, labor, and overhead used as a benchmark for measuring performance.

Pounds

A unit of weight commonly used in the British imperial and United States customary systems, equivalent to 0.453592 kilograms.