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)		22,000
Revenue ($4.00q)	$	88,000
Expenses:
Raw materials ($2.10q)		46,200
Wages and salaries ($6,500 + $0.20q)		10,900
Utilities ($2,000 + $0.05q)		3,100
Facility rent ($3,900)		3,900
Insurance ($2,400)		2,400
Miscellaneous ($800 + $0.10q)		3,000
Total expense		69,500
Net operating income	$	18,500

In July, 23,000 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)		23,000
Revenue ($4.00q)	$	92,000
Expenses:
Raw materials ($2.10q)		48,300
Wages and salaries ($6,500 + $0.20q)		11,100
Utilities ($2,000 + $0.05q)		3,150
Facility rent ($3,900)		3,900
Insurance ($2,400)		2,400
Miscellaneous ($800 + $0.10q)		3,100
Total expense		71,950
Net operating income	$	20,050

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.)

     

Answer 1

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