Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

A) $213,150
B) $237,650
C) $223,950
D) $224,920

Question

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below:

The total overhead cost at an activity level of 9,700 guest-days per month should be:

A) $213,150
B) $237,650
C) $223,950
D) $224,920

Sakura Griffin · Accepted Answer

Final Answer : C, Explanation :  To find the total overhead cost at an activity level of 9,700 guest-days per month, we need to use the formula for a flexible budget, which is:Total overhead cost = Budgeted overhead cost at the static level + (Variable overhead rate × Actual activity level)Using the information given in the problem, we can calculate the variable overhead rate as follows:Variable overhead rate = (Budgeted overhead cost at the static level - Budgeted fixed overhead cost) ÷ Budgeted activity levelVariable overhead rate = ($321,750 - $165,000) ÷ 11,500 guest-days = $13.50 per guest-dayUsing this variable overhead rate and the actual activity level of 9,700 guest-days, we can calculate the total overhead cost as follows:Total overhead cost = $321,750 + ($13.50 × 9,700) = $223,950Therefore, the best choice is C.

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

A) $213,150
B) $237,650
C) $223,950
D) $224,920

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Learning Objectives

Related questions

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:A) $213,150B) $237,650C) $223,950D) $224,920

Definitions

Learning Objectives

Learning Objectives

Related questions

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

A) $213,150
B) $237,650
C) $223,950
D) $224,920