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) 62 62 60 Revenue ($350.00q) $ 16,400 $ 21,700 $ 21,000 Expenses: Wages and salaries ($3,800 + $90.00q) 9,340 9,380 9,200 Fuel ($33.00q) 2,210 2,046 1,980 Airport fees ($860 + $30.00q) 2,605 2,720 2,660 Aircraft depreciation ($9.00q) 558 558 540 Office expenses ($240 + $1.00q) 470 302 300 Total expense 15,183 15,006 14,680 Net operating income $ 1,217 $ 6,694 $ 6,320 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	62			62			60
	Revenue	$16,400	$5,300	U	$21,700	$700	F	$21,000
	Expenses:
	Wages and salaries	$9,340	$40	F	$9,380	$180	U	$9,200
	Fuel	$2,210	$164	U	$2,046	$66	U	$1,980
	Airport fees	$2,605	$115	F	$2,720	$60	U	$2,660
	Aircraft depreciation	$558	$0	none	$558	$18	U	$540
	Office expenses	$470	$168	U	$302	$2	U	$300
	Total expenses	$15,183	$177	U	$15,006	$326	U	$14,680
	Net operating income	$1,217	$5,477	U	$6,694	$374	F	$6,320
	*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.