Question

# Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport....

Flight Café prepares in-flight meals for airlines in its kitchen located next to a 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 (\$1.80q) 52,200 Wages and salaries (\$6,200 + \$0.20q) 12,000 Utilities (\$2,100 + \$0.05q) 3,550 Facility rent (\$3,900) 3,900 Insurance (\$2,400) 2,400 Miscellaneous (\$500 + \$0.10q) 3,400 Total expense 77,450 Net operating income \$ 50,150

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 (\$1.80q) 54,000 Wages and salaries (\$6,200+ \$0.20q) 12,200 Utilities (\$2,100 + \$0.05q) 3,600 Facility rent (\$3,900) 3,900 Insurance (\$2,400) 2,400 Miscellaneous (\$500 + \$0.10q) 3,500 Total expense 79,600 Net operating income \$ 52,400

Required:

1. Calculate 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.)

Requirement 1:

 Activity Variances For the month of July Flexible budget Activity Variance Planning Budget Revenue \$132,000 \$4,400 Favorable \$127,600 Expenses: Raw materials \$54,000 \$1,800 Unfavorable \$52,200 Wages and salaries \$12,200 \$200 Unfavorable \$12,000 Utilities \$3,600 \$50 Unfavorable \$3,550 Facility rent \$3,900 \$0 None \$3,900 Insurance \$2,400 \$0 None \$2,400 Miscellaneous \$3,500 \$100 Unfavorable \$3,400 Total expense \$79,600 \$2,150 Unfavorable \$77,450 Net operating income \$52,400 \$2,250 Favorable \$50,150

Explanation:

• For revenues and net operating income, If Flexible budget is more than Planning budget then it is favorable. Otherwise, Unfavorable.
• For expenses, If Planning budget is more than Flexible budget then it is favorable. Otherwise, Unfavorable

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