Bobe Air Uses Two Measures of Activity, Flights and Passengers

question 281

Multiple Choice

Bobe 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 $44,580 per month plus $2,390 per flight plus $8 per passenger. The company expected its activity in May to be 68 flights and 211 passengers, but the actual activity was 71 flights and 210 passengers. The actual cost for plane operating costs in May was $215,140. The plane operating costs in the planning budget for May would be closest to:

• A)$208,788
• B)$215,950
• C)$206,050
• D)$215,140

---

Definitions:

Corporate Affairs

Activities and responsibilities related to the operation and management of a corporation, including compliance, governance, and public relations.

Limited Partner

One who invests in a limited partnership but does not play an active role in managing the business. Unlike general partners, limited partners are only liable for partnership debts up to the amounts they have invested.

Management Participation

Involvement or active engagement of management in the strategic and operational tasks of an organization or a particular project.

Voluntary Contract

An agreement entered into freely by parties who are capable of making their own choices and decisions, without coercion.