Use the following information to answer the following Questions
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:

-Commerce's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
A) Y = $4.50AH + $24AH.
B) Y = $4.50AH + $720,000.
C) Y = $22.50AH.
D) Y = $180,000 + $18AH.
E) Y = $945,000.

Question

Use the following information to answer the following Questions
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:

-Commerce's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
A) Y = $4.50AH + $24AH. 
B) Y = $4.50AH + $720,000. 
C) Y = $22.50AH. 
D) Y = $180,000 + $18AH. 
E) Y = $945,000.

Quizplus · Accepted Answer

A flexible budget formula typically includes both variable and fixed costs. In this case, $4.50AH represents the variable cost per activity hour, and $720,000 is the fixed cost, making option B the correct formula for a flexible budget.

Use the Following Information to Answer the Following Questions