Question

The Latiker commuter bus company uses two measures of activity, routes and commuters, in the cost...

The Latiker commuter bus company uses two measures of activity, routes and commuters, in the cost formulas in its budgets and performance reports. The cost formula for bus operating costs is $56,860 per month plus $2,874 per route plus $16 per commuter. The company expected its activity in November to be 87 routes and 260 commuters, but the actual activity was 93 routes and 269 commuters. The actual cost for bus operating costs in November was $305,100. The spending variance for bus operating costs in November would be closest to:

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The Latiker commuter bus company
Flexible budget for November Route Commuter Total Note
Numbers             93.00         269.00 A
Rate        2,874.00           16.00 B
Amount $ 267,282.00     4,304.00 271,586.00 C=A*B
Add: Fixed monthly operating costs      56,860.00 D
Flexible budget for November 328,446.00 E=C+D
Less: Actual cost for November 305,100.00
Spending Variance     23,346.00 Favorable
So Spending Variance is $ 23,346 (F).
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