Question

Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the 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 ($4.30q)	$	124,700
Expenses:
Raw materials ($2.20q)		63,800
Wages and salaries ($6,100 + $0.20q)		11,900
Utilities ($2,000 + $0.05q)		3,450
Facility rent ($3,400)		3,400
Insurance ($2,000)		2,000
Miscellaneous ($400 + $0.10q)		3,300
Total expense		87,850
Net operating income	$	36,850

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 ($4.30q)	$	129,000
Expenses:
Raw materials ($2.20q)		66,000
Wages and salaries ($6,100 + $0.20q)		12,100
Utilities ($2,000 + $0.05q)		3,500
Facility rent ($3,400)		3,400
Insurance ($2,000)		2,000
Miscellaneous ($400 + $0.10q)		3,400
Total expense		90,400
Net operating income	$	38,600

Required:

1. Compute 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