Groupe 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 $36,270 per month plus $2,064 per flight plus $1 per passenger. The company expected its activity in October to be 87 flights and 237 passengers, but the actual activity was 86 flights and 242 passengers. The actual cost for plane operating costs in October was $211,010. The activity variance for plane operating costs in October would be closest to:

A) $2,059 U
B) $5,065 F
C) $2,059 F
D) $5,065 U

To calculate the activity variance for plane operating costs, we need to first calculate the flexible budget amount based on the actual activity level.

Flexible budget = Monthly fixed cost + (Actual flights x Cost per flight) + (Actual passengers x Cost per passenger)
Flexible budget = $36,270 + (86 x $2,064) + (242 x $1) = $229,626

The actual cost for plane operating costs was $211,010, so the total variance is:

Total Variance = Actual cost - Flexible budget
Total Variance = $211,010 - $229,626 = $18,616 F

To split the total variance into its activity and spending components, we need to compare the actual activity level to the flexible budget level:

Activity variance = (Actual activity - Flexible budget activity) x Cost per unit of activity
Activity variance = [(86 flights - 87 flights) x $2,064] + [(242 passengers - 237 passengers) x $1]
Activity variance = (-$2,064) + $5 = $2,059 F

Therefore, the activity variance for plane operating costs in October is $2,059 F, which is closest to option C.