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)		59		59		57
Revenue ($355.00q)	$	16,300	$	20,945	$	20,235
Expenses:
Wages and salaries ($3,800 + $89.00q)		9,013		9,051		8,873
Fuel ($32.00q)		2,054		1,888		1,824
Airport fees ($810 + $31.00q)		2,529		2,639		2,577
Aircraft depreciation ($9.00q)		531		531		513
Office expenses ($220 + $1.00q)		447		279		277
Total expense		14,574		14,388		14,064
Net operating income	$	1,726	$	6,557	$	6,171

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

			Flexible budget performance
			Actual	Revenue & spending		Flexible	Activity variance		planning
				variance		budget			budget
Revenue			16,300	4,645	U	20,945	710	F	20,235
expenses
Wages and salaries			9,013	38	F	9,051	178	U	8,873
Fuel			2,054	166	U	1,888	64	U	1,824
Airport fees			2,529	110	F	2,639	62	U	2,577
Aircraft depreciation			531	0	N	531	18	U	513
office expenses			447	168	U	279	2	U	277
total expense			14,574	186	U	14,388	324	U	14,064
net operating income			1,726	4,831	U	6,557	386	F	6,171