Question

Dallas Snow Removal's cost formula for its vehicle operating cost is $2,060 per month plus $306 per snow-day. For the month of January, the company planned for activity of 16 snow-days, but the actual level of activity was 18 snow-days. The actual vehicle operating cost for the month was $7,720. The vehicle operating cost in the static or planning budget for January would be closest to:

Answer 1

The vehicle operating cost in the static or planning budget for January would be closest to $6,956.

Further Explanation:

Budget:

Budget is a future estimate of the operating activities of the business. Budget is prepared for a future definite time. There are various types of budgets such as sales budget, production budget, cash budget, overhead budget and master budget. Budget estimates the future sales, production, overheads.

Static budget:

Static budget is type of budget that does not vary the amount with the significant change in the volume. The amount of the static budget would always vary from the actual results because static budget does not vary with the change in the volume.

Calculate the operating cost in planning cost for Dallas for the month of January:

The operating cost (planning budget) will include the vehicle operating cost and additional cost on the snow-day. The operating cost of the vehicle is $2,060. The show-day cost per day is $306 and the planned snow-days are 16. Therefore, the operating cost will be calculated as follows:

$\text{Operating cost in planning cost}= \text{Vehicle operating cost}+\text{Snow-day cost}\\=\ 2,060+\ 4,896}\\=\ 6,956}$

Thus, the vehicle operating cost in the static or planning budget for January would be closest to $6,956.

Working note:

Calculate the snow-day cost:

$\text{Snow-day cost}=\text{Planned snow days}\times\text{Snow-day cost/day}\\=16\times\ 306\\\text{=\ 4,896}$

The total snow-day cost is $4,896.

Learn more:

1.  Learn more about the cost allocation https://brainly.com/question/12960164

2.  Learn more about the manufacturing cost https://brainly.com/question/10570313

3.  Learn more about the percentage of costs method https://brainly.com/question/12960656

Answer details:

Grade: Senior School

Subject: Cost accounting

Chapter: Budgeting

Keywords: Budgeting, Dallas, Vehicle operating cost, Snow day, January, Operating cost, Snow removal’s cost formula, Static budget, Planning budget, Cost formula, Level of activity, Month of January, Actual vehicle operating cost, forecasting, forecast, operating cost budget.