Bobe Air Uses Two Measures of Activity, Flights and Passengers

question 317

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 spending variance for plane operating costs in May would be closest to:

• A)$810 U
• B)$6,352 U
• C)$810 F
• D)$6,352 F

---

Definitions:

Internal Revenue Code

The comprehensive body of tax laws and regulations in the United States, governing federal tax obligations for individuals and organizations.

Federal Income Taxes

Taxes levied by the United States federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Stockholders' Equity

The owners' residual interest in a corporation, represented by the difference between assets and liabilities on the balance sheet.

Investments

Assets purchased with the expectation that they will generate income or will appreciate in the future.