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)		28,000
Revenue ($4.00q)	$	112,000
Expenses:
Raw materials ($2.00q)		56,000
Wages and salaries ($6,200 + $0.20q)		11,800
Utilities ($1,900 + $0.05q)		3,300
Facility rent ($3,300)		3,300
Insurance ($3,000)		3,000
Miscellaneous ($700 + $0.10q)		3,500
Total expense		80,900
Net operating income	$	31,100

In July, 29,000 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)		29,000
Revenue ($4.00q)	$	116,000
Expenses:
Raw materials ($2.00q)		58,000
Wages and salaries ($6,200+ $0.20q)		12,000
Utilities ($1,900 + $0.05q)		3,350
Facility rent ($3,300)		3,300
Insurance ($3,000)		3,000
Miscellaneous ($700 + $0.10q)		3,600
Total expense		83,250
Net operating income	$	32,750

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.)

Flight Café
Activity Variances
For the Month Ended July 31
Revenue
Expenses:
Raw materials
Wages and salaries
Utilities
Facility rent
Insurance
Miscellaneous
Total expense
Net operating income

Answer 1