Question

# Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next...

 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) 23,000 Revenue (\$4.20q) \$ 96,600 Expenses: Raw materials (\$1.90q) 43,700 Wages and salaries (\$6,200 + \$0.20q) 10,800 Utilities (\$1,800 + \$0.05q) 2,950 Facility rent (\$3,100) 3,100 Insurance (\$2,900) 2,900 Miscellaneous (\$700 + \$0.10q) 3,000 Total expense 66,450 Net operating income \$ 30,150

 In July, 24,000 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) 24,000 Revenue (\$4.20q) \$ 100,800 Expenses: Raw materials (\$1.90q) 45,600 Wages and salaries (\$6,200 + \$0.20q) 11,000 Utilities (\$1,800 + \$0.05q) 3,000 Facility rent (\$3,100) 3,100 Insurance (\$2,900) 2,900 Miscellaneous (\$700 + \$0.10q) 3,100 Total expense 68,700 Net operating income \$ 32,100

 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.)

Solution

Flight café

Activity variance

 Particulars planning budget Flexible budget Activity variance Meals 23000 24000 Revenue \$96600 \$100800 \$4200(F) Expenses Raw materials \$43700 \$45600 \$1900(U) Wages and salaries \$10800 \$11000 \$200(U) Utilities \$2950 \$3000 \$50(U) Facility rent \$3100 \$3100 0 Insurance \$2900 \$2900 0 Miscellaneous \$3000 \$3100 \$100(U) Total expenses 66450 \$68700 \$220(U) Net operating income \$30150 \$32100 \$1950(F)