Question

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

Vulcan Flyovers
Operating Data
For the Month Ended July 31
	Actual Results		Flexible Budget		Planning Budget
Flights (q)		62		62		60
Revenue ($355.00q)	$	16,000	$	22,010	$	21,300
Expenses:
Wages and salaries ($3,700 + $85.00q)		8,940		8,970		8,800
Fuel ($31.00q)		2,090		1,922		1,860
Airport fees ($860 + $33.00q)		2,766		2,906		2,840
Aircraft depreciation ($10.00q)		620		620		600
Office expenses ($220 + $1.00q)		450		282		280
Total expense		14,866		14,700		14,380
Net operating income	$	1,134	$	7,310	$	6,920

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances

	Actual results	Revenue and spending variance	Flexible budget	Activity variance	Static budget
Flights	62		62		60
Revenue	16000	6010 U	22010	710 F	21300
Expenses
Wages and salaries	8940	30 F	8970	170 U	8800
Fuel	2090	168 U	1922	62 U	1860
Airport fees	2766	140 F	2906	66 U	2840
Aircraft depreciation	620	0 None	620	20 U	600
Office expenses	450	168 U	282	2 U	280
Totel expense	14866	166 U	14700	320 U	14380
Net operating income	1134	6176 U	7310	390 F	6920