Groupe Air Uses Two Measures of Activity, Flights and Passengers

question 431

Multiple Choice

Groupe 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 $36,270 per month plus $2,064 per flight plus $1 per passenger. The company expected its activity in October to be 87 flights and 237 passengers, but the actual activity was 86 flights and 242 passengers. The actual cost for plane operating costs in October was $211,010. The activity variance for plane operating costs in October would be closest to:

• A) $2,059 U
• B) $5,065 F
• C) $2,059 F
• D) $5,065 U

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Definitions:

Anticipate

To expect or predict something based on current knowledge or trends.

Critical Thinking

Aiming to impartially examine and appraise a matter with the intention of making a determination.

Judgmental

Pertains to the tendency of forming opinions or conclusions about people or situations often without full knowledge or consideration of the facts.

Vigilant

Being keenly watchful to detect danger or maintaining careful attention to responsibilities; alertness to potential problems or threats.