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) 60 60 58 Revenue ($350.00q) $ 16,300 $ 21,000 $ 20,300 Expenses: Wages and salaries ($3,800 + $92.00q) 9,276 9,320 9,136 Fuel ($31.00q) 2,028 1,860 1,798 Airport fees ($800 + $33.00q) 2,660 2,780 2,714 Aircraft depreciation ($10.00q) 600 600 580 Office expenses ($240 + $1.00q) 468 300 298 Total expense 15,032 14,860 14,526 Net operating income $ 1,268 $ 6,140 $ 5,774 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

Ans.	VULCAN FLYOVERS
	Flexible Budget Performance Report
	For the Month Ended JULY 31
		Actual Results	Spending variance	Flexible Budget	Activity variance	Planning Budget
	Flights	60			60			58
	Revenue	$16,300	$4,700	U	$21,000	$700	F	$20,300
	Expenses:
	Wages and salaries	$9,276	$44	F	$9,320	$184	U	$9,136
	Fuel	$2,028	$168	U	$1,860	$62	U	$1,798
	Airport fees	$2,660	$120	F	$2,780	$66	U	$2,714
	Aircraft depreciation	$600	$0	none	$600	$20	U	$580
	Office expenses	$468	$168	U	$300	$2	U	$298
	Total expenses	$15,032	$172	U	$14,860	$334	U	$14,526
	Net operating income	$1,268	$4,872	U	$6,140	$366	F	$5,774
	*Flexible budget is prepared on the basis of actual units.
	*Fixed costs remain constant on each level of sales.
	Revenue & Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in revenue or net operating income and decrease in expenses from Planning budget to Flexible budget and flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from Planning budget to flexible budget and flexible budget to actual results =   Unfavorable.