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)		21,000
Revenue ($4.30q)	$	90,300
Expenses:
Raw materials ($2.10q)		44,100
Wages and salaries ($6,100 + $0.20q)		10,300
Utilities ($2,100 + $0.05q)		3,150
Facility rent ($3,800)		3,800
Insurance ($2,600)		2,600
Miscellaneous ($300 + $0.10q)		2,400
Total expense		66,350
Net operating income	$	23,950

In July, 22,000 actually meals were 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)		22,000
Revenue ($4.30q)	$	94,600
Expenses:
Raw materials ($2.10q)		46,200
Wages and salaries ($6,100+ $0.20q)		10,500
Utilities ($2,100 + $0.05q)		3,200
Facility rent ($3,800)		3,800
Insurance ($2,600)		2,600
Miscellaneous ($300 + $0.10q)		2,500
Total expense		68,800
Net operating income	$	25,800

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.)

Answer 1

Flight Cafe
Activity varainces
For the month Ended July 31
	Flexible Budget	Planning Budget	Activity varainces
Budgeted Meals	22000	21000
Revenue	94600	90300	4300	F
Expenses:
Raw materials	46200	44100	2100	U
Wages and salaries	10500	10300	200	U
Utilities	3200	3150	50	U
Facility rent	3800	3800	0	None
Insurance	2600	2600	0	None
Miscellaneous	2500	2400	100	U
Total Expense	68800	66350	2450	U
Net operating income	25800	23950	1850	F