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)		54		54		52
Revenue ($340.00q)	$	16,200	$	18,360	$	17,680
Expenses:
Wages and salaries ($3,300 + $87.00q)		7,964		7,998		7,824
Fuel ($31.00q)		1,842		1,674		1,612
Airport fees ($820 + $31.00q)		2,374		2,494		2,432
Aircraft depreciation ($11.00q)		594		594		572
Office expenses ($230 + $1.00q)		452		284		282
Total expense		13,226		13,044		12,722
Net operating income	$	2,974	$	5,316	$	4,958

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

Vulcan Flyovers
Flexible Budget Performance Report
For the month ended July 31
	Actual Results	Revenue/Spending		Flexible	Activity		Planning
		Variance		Budget	Variance		Budget
	($)	($)		($)			($)
Flights (q)	54.00			54.00			52.00
Revenue	16,200.00	2,160.00	U	18,360.00	680.00	F	17,680.00
Expenses:
Wages and Salaries	7,964.00	34.00	F	7,998.00	174.00	U	7,824.00
Fuel	1,842.00	168.00	U	1,674.00	62.00	U	1,612.00
Airport Fees	2,374.00	120.00	F	2,494.00	62.00	U	2,432.00
Aircraft Depreciation	594.00	-	-	594.00	22.00	U	572.00
Office Expenses	452.00	168.00	U	284.00	2.00	U	282.00
Total Expense	13,226.00	182.00	U	13,044.00	322.00	U	12,722.00
Net Operating Income	2,974.00	2,342.00	U	5,316.00	358.00	F	4,958.00
(Revenue - Expenses)
Explanation
Revenue/Spending Variance = Actual Result - Flexible Budget Amount
Activity Variances = Flexible Budget Amounts - Planning Budget Amounts