Kara Catering Uses Two Measures of Activity,jobs and Meals,in the Cost

question 249

Multiple Choice

Kara Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $310 per month plus $84 per job plus $17 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in July to be 15 jobs and 127 meals,but the actual activity was 14 jobs and 126 meals.The actual cost for catering supplies in July was $3,620.The activity variance for catering supplies in July would be closest to:

• A)$109 F
• B)$109 U
• C)$101 F
• D)$101 U

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Definitions:

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and loan payments.