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)		53		53		51
Revenue ($340.00q)	$	16,400	$	18,020	$	17,340
Expenses:
Wages and salaries ($3,600 + $91.00q)		8,381		8,423		8,241
Fuel ($34.00q)		1,964		1,802		1,734
Airport fees ($880 + $32.00q)		2,426		2,576		2,512
Aircraft depreciation ($10.00q)		530		530		510
Office expenses ($230 + $1.00q)		451		283		281
Total expense		13,752		13,614		13,278
Net operating income	$	2,648	$	4,406	$	4,062

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	53			53			51
	Revenue	$16,400	$1,620	U	$18,020	$680	F	$17,340
	Expenses:
	Wages and salaries	$8,381	$42	F	$8,423	$182	U	$8,241
	Fuel	$1,964	$162	U	$1,802	$68	U	$1,734
	Airport fees	$2,426	$150	F	$2,576	$64	U	$2,512
	Aircraft depreciation	$530	$0	none	$530	$20	U	$510
	Office expenses	$451	$168	U	$283	$2	U	$281
	Total expenses	$13,752	$138	U	$13,614	$336	U	$13,278
	Net operating income	$2,648	$1,758	U	$4,406	$344	F	$4,062
	*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.