Question

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 $56,890 per month plus $2,890 per route plus $17 per commuter. The company expected its activity in November to be 88 routes and 258 commuters, but the actual activity was 97 routes and 264 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:

Multiple Choice

• $10,496 Favorable

• $10,496 Unfavorable

• $36,608 Unfavorable

• $26,112 Favorable

• $36,608 Favorable

Answer 1

Given information,

Standard operating cost=$56890

route charges per is $2890

Commuter charges is $17 and

Actual November Expenses is $305100

Particulars	$
A.November month actual expenses	305100
B. route charges ( 97 routes * $2890 per route)	280330
C. Commuter charges (264 commuters *$17 per commuter)	4488
D. Actual operating expenses incurred in November (A-B-C)	20282
E. Standard operating expenses per month	56890
F. variance( standard - actual )i.e. ( E- D)	36608

Since the actual expenses are less than the standard amount can be spend, it is in favorable position i.e.36606 favorable

Since option3 is correct and remains options are irrelevant.