Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,000 pounds of oysters in August. The company’s flexible budget for August appears below:

Quilcene Oysteria
Flexible Budget
For the Month Ended August 31
Actual pounds (q)		7,000
Revenue ($4.25q)	$	29,750
Expenses:
Packing supplies ($0.25q)		1,750
Oyster bed maintenance ($3,500)		3,500
Wages and salaries ($2,200 + $0.30q)		4,300
Shipping ($0.60q)		4,200
Utilities ($1,260)		1,260
Other ($410 + $0.01q)		480
Total expense		15,490
Net operating income	$	14,260

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,000
Revenue	$	26,800
Expenses:
Packing supplies		1,920
Oyster bed maintenance		3,360
Wages and salaries		4,710
Shipping		3,930
Utilities		1,070
Other		1,100
Total expense		16,090
Net operating income	$	10,710

Required:

Calculate the company’s revenue and spending variances for August. (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.)

.

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)		59		59		57
Revenue ($360.00q)	$	16,400	$	21,240	$	20,520
Expenses:
Wages and salaries ($3,600 + $86.00q)		8,642		8,674		8,502
Fuel ($32.00q)		2,054		1,888		1,824
Airport fees ($880 + $33.00q)		2,722		2,827		2,761
Aircraft depreciation ($8.00q)		472		472		456
Office expenses ($220 + $1.00q)		447		279		277
Total expense		14,337		14,140		13,820
Net operating income	$	2,063	$	7,100	$	6,700

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

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1	Revenue and Spending Variance
		Flexible Budget	Actual	Revenue/spending variance	Favorable/Unfavorable
	Actual Pounds	7000	7000
	Revenue	29750	26800	2950	Unfavorable
	Expenses:
	Packaging Supplies	1750	1920	170	Unfavorable
	Bed Maintenance	3500	3360	140	Favorable
	Wages and salaries	4300	4710	410	Unfavorable
	Shipping	4200	3930	270	Favorable
	Utilities	1260	1070	190	Favorable
	Other	480	1100	620	Unfavorable
	Total Expense	15490	16090	600	Unfavorable
	Net Operating income	14260	10710	2350	Unfavorable
2	Activity and Revenue-Spending Variance
					Actual vs Flexible		Flexible vs Planning
					Revenue and Spending Variance		Activity Variance
		Acutal	Flexible	Planning	$	U/F	$	U/F
	Flights (q)	59	59	57	0	None	2	F
	Revenue ($360.00q)	16,400	21,240	20,520	4,840	U	720	F
	Expenses:
	Wages and salaries ($3,600 + $86.00q)	8,642	8,674	8,502	32	F	172	U
	Fuel ($32.00q)	2,054	1,888	1,824	166	U	64	U
	Airport fees ($880 + $33.00q)	2,722	2,827	2,761	105	F	66	U
	Aircraft depreciation ($8.00q)	472	472	456	0	None	16	U
	Office expenses ($220 + $1.00q)	447	279	277	168	U	2	U
	Total expense	14,337	14,140	13,820	197	U	320	U
	Net operating income	2,063	7,100	6,700	5,037	U	400	F