Asked by Jessica Stocker on Jul 28, 2024

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Courington Detailing's cost formula for its materials and supplies is $2,420 per month plus $9 per vehicle. For the month of August, the company planned for activity of 63 vehicles, but the actual level of activity was 33 vehicles. The actual materials and supplies for the month was $2,840.The materials and supplies in the flexible budget for August would be closest to:

A) $1,565
B) $2,717
C) $2,987
D) $2,840

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing for more accurate financial planning and analysis.

Materials

Raw inputs or components that are used in the manufacturing process to produce finished goods.

  • Evaluate and recognize systems for planning, flexible, and existing budgets.
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Gurridhillon DhillonJul 31, 2024
Final Answer :
B
Explanation :
Using the cost formula:
Fixed cost = $2,420
Variable cost (per vehicle) = $9

Flexible budget for 63 vehicles:
Total cost = $2,420 + ($9 x 63) = $2,987

To find the flexible budget for 33 vehicles, we will use the cost formula:
Total cost = $2,420 + ($9 x 33) = $2,797

However, the actual materials and supplies cost for August was $2,840. This means that the company incurred $43 ($2,840 - $2,797) more in materials and supplies cost than what they should have incurred based on the flexible budget.

Therefore, the materials and supplies in the flexible budget for August would be closest to $2,797 + $43 = $2,740, which is closest to choice B ($2,717).