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)		58		58		56
Revenue ($360.00q)	$	16,400	$	20,880	$	20,160
Expenses:
Wages and salaries ($3,500 + $86.00q)		8,456		8,488		8,316
Fuel ($32.00q)		2,022		1,856		1,792
Airport fees ($860 + $34.00q)		2,722		2,832		2,764
Aircraft depreciation ($8.00q)		464		464		448
Office expenses ($230 + $1.00q)		456		288		286
Total expense		14,120		13,928		13,606
Net operating income	$	2,280	$	6,952	$	6,554

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

	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Flights	58			58			56
Revenue	16400	4480	U	20880	720	F	20160
Expenses:
Wages and salaries	8456	32	F	8488	172	U	8316
Fuel	2022	166	U	1856	64	U	1792
Airpost fees	2722	110	F	2832	68	U	2764
Aircraft depreciation	464	0	None	464	16	U	448
Office expenses	456	168	U	288	2	U	286
Total expense	14120	192	U	13928	322	U	13606
Net operating income	2280	4672	U	6952	398	F	6554