Question

Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below:

Flight Café Planning Budget For the Month Ended July 31
Budgeted meals (q)		26,000
Revenue ($4.30q)	$	111,800
Expenses:
Raw materials ($2.00q)		52,000
Wages and salaries ($6,300 + $0.20q)		11,500
Utilities ($2,000 + $0.05q)		3,300
Facility rent ($3,800)		3,800
Insurance ($2,400)		2,400
Miscellaneous ($700 + $0.10q)		3,300
Total expense		76,300
Net operating income	$	35,500

In July, 27,000 meals were actually served. The company’s flexible budget for this level of activity appears below:

Flight Café Flexible Budget For the Month Ended July 31
Budgeted meals (q)		27,000
Revenue ($4.30q)	$	116,100
Expenses:
Raw materials ($2.00q)		54,000
Wages and salaries ($6,300 + $0.20q)		11,700
Utilities ($2,000 + $0.05q)		3,350
Facility rent ($3,800)		3,800
Insurance ($2,400)		2,400
Miscellaneous ($700 + $0.10q)		3,400
Total expense		78,650
Net operating income	$	37,450

1. Compute the company’s activity variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Flight Café Activity Variances For the Month Ended July 31 Revenue??? F Expenses:??? Raw materials???? U Wages and salaries???? U Utilities??? U Facility rent?? None Insurance????? None Miscellaneous????? U Total expense???? U Net operating income???? F

Answer 1

Answer

	Activity variance
Revenues	$            4,300.00	F
Expenses:
Raw materials	$            2,000.00	U
Wages & Salaries	$                200.00	U
Utilities	$                  50.00	U
facility Rent	$                         -	None
Insurance	$                         -	None
Miscellaneous	$                100.00	U
Total Expenses	$            2,350.00	U
Net Operating Income	$            1,950.00	F

• Workings

		WORKING COLUMNS					Flexible Budget	Activity variance		Planning Static Budget
Budgeted meals							27,000			26,000
Revenues				$      4.30			$ 116,100.00	$            4,300.00	F	$        111,800.00
Expenses:
Raw materials	(	$                      -	)	$      2.00	x 27000 or 26000		$    54,000.00	$            2,000.00	U	$          52,000.00
Wages & Salaries	(	$         6,300.00	)	$      0.20	x 27000 or 26000	)	$    11,700.00	$                200.00	U	$          11,500.00
Utilities	(	$         2,000.00	+	$      0.05	x 27000 or 26000	)	$      3,350.00	$                  50.00	U	$             3,300.00
facility Rent	(	$         3,800.00	+	$           -	x 27000 or 26000	)	$      3,800.00	$                         -	None	$             3,800.00
Insurance	(	$         2,400.00	+	$           -	x 27000 or 26000		$      2,400.00	$                         -	None	$             2,400.00
Miscellaneous	(	$            700.00	)	$      0.10	x 27000 or 26000		$      3,400.00	$                100.00	U	$             3,300.00
Total Expenses		$      15,200.00		$      2.35			$    78,650.00	$            2,350.00	U	$          76,300.00
Net Operating Income							$    37,450.00	$            1,950.00	F	$          35,500.00