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)		24,000
Revenue ($4.30q)	$	103,200
Expenses:
Raw materials ($1.90q)		45,600
Wages and salaries ($6,000 + $0.20q)		10,800
Utilities ($1,900 + $0.05q)		3,100
Facility rent ($3,700)		3,700
Insurance ($2,400)		2,400
Miscellaneous ($500 + $0.10q)		2,900
Total expense		68,500
Net operating income	$	34,700

In July, 25,000 actually meals were 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)		25,000
Revenue ($4.30q)	$	107,500
Expenses:
Raw materials ($1.90q)		47,500
Wages and salaries ($6,000+ $0.20q)		11,000
Utilities ($1,900 + $0.05q)		3,150
Facility rent ($3,700)		3,700
Insurance ($2,400)		2,400
Miscellaneous ($500 + $0.10q)		3,000
Total expense		70,750
Net operating income	$	36,750

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