Question

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

Vulcan Flyovers
Operating Data
For the Month Ended July 31
	Actual Results		Flexible Budget		Planning Budget
Flights (q)		58		58		56
Revenue ($345.00q)	$	16,200	$	20,010	$	19,320
Expenses:
Wages and salaries ($3,500 + $91.00q)		8,736		8,778		8,596
Fuel ($33.00q)		2,078		1,914		1,848
Airport fees ($800 + $33.00q)		2,599		2,714		2,648
Aircraft depreciation ($11.00q)		638		638		616
Office expenses ($210 + $1.00q)		436		268		266
Total expense		14,487		14,312		13,974
Net operating income	$	1,713	$	5,698	$	5,346

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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.)

Answer 1

• All working forms part of the answer

	Actual	Revenue & Spending Variance		Flexible	Activity variances		Planning
	Results			Budget			Budget
Flights (q)	58			58			56
Revenue ($345.00q)	$           16,200.00	$            3,810.00	Unfavourable	$          20,010.00	$               690.00	Favourable	$        19,320.00
Expenses:
Wages and salaries ($3,500 + $91.00q)	$             8,736.00	$                  42.00	Favourable	$             8,778.00	$               182.00	Unfavourable	$           8,596.00
Fuel ($33.00q)	$             2,078.00	$                164.00	Unfavourable	$             1,914.00	$                  66.00	Unfavourable	$           1,848.00
Airport fees ($800 + $33.00q)	$             2,599.00	$                115.00	Favourable	$             2,714.00	$                  66.00	Unfavourable	$           2,648.00
Aircraft depreciation ($11.00q)	$                 638.00	$                         -	None	$                638.00	$                  22.00	Unfavourable	$              616.00
Office expenses ($210 + $1.00q)	$                 436.00	$                168.00	Unfavourable	$                268.00	$                    2.00	Unfavourable	$              266.00
Total expense	$           14,487.00	$                175.00	Unfavourable	$          14,312.00	$               338.00	Unfavourable	$        13,974.00
Net operating income	$             1,713.00	$            3,985.00	Unfavourable	$             5,698.00	$               352.00	Favourable	$           5,346.00