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) 57 57 55 Revenue ($355.00q) $ 16,400 $ 20,235 $ 19,525 Expenses: Wages and salaries ($3,500 + $86.00q) 8,370 8,402 8,230 Fuel ($31.00q) 1,935 1,767 1,705 Airport fees ($850 + $31.00q) 2,482 2,617 2,555 Aircraft depreciation ($11.00q) 627 627 605 Office expenses ($230 + $1.00q) 455 287 285 Total expense 13,869 13,700 13,380 Net operating income $ 2,531 $ 6,535 $ 6,145 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	57			57			55
	Revenue	$16,400	$3,835	U	$20,235	$710	F	$19,525
	Expenses:
	Wages and salaries	$8,370	$32	F	$8,402	$172	U	$8,230
	Fuel	$1,935	$168	U	$1,767	$62	U	$1,705
	Airport fees	$2,482	$135	F	$2,617	$62	U	$2,555
	Aircraft depreciation	$627	$0	none	$627	$22	U	$605
	Office expenses	$455	$168	U	$287	$2	U	$285
	Total expenses	$13,869	$169	U	$13,700	$320	U	$13,380
	Net operating income	$2,531	$4,004	U	$6,535	$390	F	$6,145
	*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.