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)		28,000
Revenue ($4.10q)	$	114,800
Expenses:
Raw materials ($2.10q)		58,800
Wages and salaries ($6,300 + $0.20q)		11,900
Utilities ($2,100 + $0.05q)		3,500
Facility rent ($3,600)		3,600
Insurance ($2,100)		2,100
Miscellaneous ($600 + $0.10q)		3,400
Total expense		83,300
Net operating income	$	31,500

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 ($4.10q)	$	118,900
Expenses:
Raw materials ($2.10q)		60,900
Wages and salaries ($6,300 + $0.20q)		12,100
Utilities ($2,100 + $0.05q)		3,550
Facility rent ($3,600)		3,600
Insurance ($2,100)		2,100
Miscellaneous ($600 + $0.10q)		3,500
Total expense		85,750
Net operating income	$	33,150

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.)

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

Solution 1:

Flight Café
Activity Variances
For the month ended July 31
Particulars	Planning Budget	Flexible Budget	Activity Variance	Favorable / Unfavorable / None
Revenue	$114,800.00	$118,900.00	$4,100.00	F
Expenses:
Raw Materials	$58,800.00	$60,900.00	$2,100.00	U
Wages and Salaries	$11,900.00	$12,100.00	$200.00	U
Utilities	$3,500.00	$3,550.00	$50.00	U
Facility Rent	$3,600.00	$3,600.00	$0.00	None
Insurance	$2,100.00	$2,100.00	$0.00	None
Miscellenous	$3,400.00	$3,500.00	$100.00	U
Total expense	$83,300.00	$85,750.00	$2,450.00	U
Net Operating Income	$31,500.00	$33,150.00	$1,650.00	F