Question

Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport. The company’s planning budget for July appears below:

Flight Café
Planning Budget
For the Month Ended July 31
Budgeted meals (q)		29,000
Revenue ($3.80q)	$	110,200
Expenses:
Raw materials ($1.90q)		55,100
Wages and salaries ($6,500 + $0.20q)		12,300
Utilities ($2,100 + $0.05q)		3,550
Facility rent ($3,000)		3,000
Insurance ($2,400)		2,400
Miscellaneous ($500 + $0.10q)		3,400
Total expense		79,750
Net operating income	$	30,450

In July, 30,000 meals were actually served. The company’s flexible budget for this level of activity appears below:

Flight Café
Flexible Budget
For the Month Ended July 31
Budgeted meals (q)		30,000
Revenue ($3.80q)	$	114,000
Expenses:
Raw materials ($1.90q)		57,000
Wages and salaries ($6,500+ $0.20q)		12,500
Utilities ($2,100 + $0.05q)		3,600
Facility rent ($3,000)		3,000
Insurance ($2,400)		2,400
Miscellaneous ($500 + $0.10q)		3,500
Total expense		82,000
Net operating income	$	32,000

Required:

1. Calculate the company’s activity variances for July. (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