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) 29,000
  Revenue ($4.40q) $ 127,600
  Expenses:
      Raw materials ($2.20q) 63,800
      Wages and salaries ($6,200 + $0.20q) 12,000
      Utilities ($2,100 + $0.05q) 3,550
      Facility rent ($3,100) 3,100
      Insurance ($2,400) 2,400
      Miscellaneous ($700 + $0.10q) 3,600
  Total expense 88,450
  Net operating income $ 39,150  


In July, 30,000 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) 30,000
  Revenue ($4.40q) $ 132,000
  Expenses:
      Raw materials ($2.20q) 66,000
      Wages and salaries ($6,200 + $0.20q) 12,200
      Utilities ($2,100 + $0.05q) 3,600
      Facility rent ($3,100) 3,100
      Insurance ($2,400) 2,400
      Miscellaneous ($700 + $0.10q) 3,700
  Total expense 91,000
  Net operating income $ 41,000


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

Homework Answers

Answer #1

Solution 1:

Flight café
Activity Variances
For the month ended July 31
Particulars Flexible Budget (30000 meals) Planning Budget (29000 meals) Variances Fav. / Unfav.
Revenue $132,000.00 $127,600.00 $4,400.00 F
Expenses:
Raw Materials $66,000.00 $63,800.00 $2,200.00 U
Wages and salaries $12,200.00 $12,000.00 $200.00 U
Utilities $3,600.00 $3,550.00 $50.00 U
Facility rent $3,100.00 $3,100.00 $0.00 None
Insurance $2,400.00 $2,400.00 $0.00 None
Miscellaneous $3,700.00 $3,600.00 $100.00 U
Total Expenses $91,000.00 $88,450.00 $2,550.00 U
Net Operating Income $41,000.00 $39,150.00 $1,850.00 F
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