Question

Otomo Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:

	Fixed element per month			Variable element per guest			Variable element per jeep
Revenue	$	0		$	98		$	0
Tour guide wages	$	0		$	0		$	103
Vehicle expenses	$	4,400		$	5		$	50
Administrative expenses	$	1,400		$	1		$	0

In July, the company budgeted for 364 guests and 134 jeeps. The company's income statement showing the actual results for the month appears below:

Otomo Jeep Tours
Income Statement
For the Month Ended July 31
Actual guests		358
Actual jeeps		136
Revenue	$	35,024
Expenses:
Tour guide wages		13,758
Vehicle expenses		13,110
Administrative expenses		1,758
Total expense		28,626
Net operating income	$	6,398

Required:

Prepare a report showing the company's activity variances for July. Label each variance as favorable (F) or unfavorable (U). (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