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)		59		59		57
Revenue ($350.00q)	$	16,300	$	20,650	$	19,950
Expenses:
Wages and salaries ($3,100 + $86.00q)		8,142		8,174		8,002
Fuel ($31.00q)		1,997		1,829		1,767
Airport fees ($810 + $30.00q)		2,465		2,580		2,520
Aircraft depreciation ($11.00q)		649		649		627
Office expenses ($240 + $1.00q)		467		299		297
Total expense		13,720		13,531		13,213
Net operating income	$	2,580	$	7,119	$	6,737

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

	Actual	Revenue and spending variances		Flexible Budget	Activity variances		Planning Budget
Flights (q)	59			59			57
Revenue	16300	4350	U	20650	700	F	19950
Expenses:
Wages and salaries	8142	32	F	8174	172	U	8002
Fuel	1997	168	U	1829	62	U	1767
Airport fees	2465	115	F	2580	60	U	2520
Aircraft depreciation	649	0	None	649	22	U	627
Office expenses	467	168	U	299	2	U	297
Total expense	13720	189	U	13531	318	U	13213
Net operating income	2580	4539	U	7119	382	F	6737