Question

Exercise 9-4 Prepare a Flexible Budget Performance Report [LO9-4]

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 + $89.00q)		8,535		8,573		8,395
Fuel ($30.00q)		1,880		1,710		1,650
Airport fees ($860 + $32.00q)		2,559		2,684		2,620
Aircraft depreciation ($10.00q)		570		570		550
Office expenses ($230 + $1.00q)		455		287		285
Total expense		13,999		13,824		13,500
Net operating income	$	2,401	$	6,411	$	6,025

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

Sollution 1

Vulcan Flyovers
Production Department Flexible Budget Performance Report
For The Month Ended July 31
		1	2	3	4	5
			(1-3)		(3-5)
	Standard Rate per Flight (given)	Actual results (given)	Revenue & Spending variances	Flexible budget (given)	Activity variances	Planning budget(given)
Flights(q)		57			57			55
Sales Revenue	$355.00	$16,400.00	-$3,835.00	U	$20,235.00	$710.00	F	$19,525.00
Wages and salaries	($3,500 + $89.00q)	$8,535.00	-$38.00	F	$8,573.00	$178.00	U	$8,395.00
Fuel	($30.00q)	$1,880.00	$1,474.00	U	$1,710.00	$60.00	U	$1,650.00
Airport fees	($860 + $32.00q)	$2,559.00	$1,520.00	F	$2,684.00	$672.00	U	$2,620.00
Aircraft depreciation	($10.00q)	$570.00	$0.00	None	$570.00	$20.00	U	$550.00
Office expenses	($230 + $1.00q)	$455.00	$168.00	U	$287.00	$2.00	U	$285.00
Total expense		$13,999.00	$175.00	U	$13,824.00	$324.00	U	$13,500.00
Net operating income		$2,401.00	-$4,010.00	U	$6,411.00	$386.00	F	$6,025.00
		Flexible Budget Variance		Sales Volume Variance
			$4,010.00	U		$386.00	F
		Static Budget Variance
			$3,624.00	U