Question

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)		26,000
Revenue ($4.00q)	$	104,000
Expenses:
Raw materials ($2.00q)		52,000
Wages and salaries ($6,200 + $0.20q)		11,400
Utilities ($2,100 + $0.05q)		3,400
Facility rent ($3,300)		3,300
Insurance ($2,000)		2,000
Miscellaneous ($600 + $0.10q)		3,200
Total expense		75,300
Net operating income	$	28,700

In July, 27,000 actually meals were 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)		27,000
Revenue ($4.00q)	$	108,000
Expenses:
Raw materials ($2.00q)		54,000
Wages and salaries ($6,200+ $0.20q)		11,600
Utilities ($2,100 + $0.05q)		3,450
Facility rent ($3,300)		3,300
Insurance ($2,000)		2,000
Miscellaneous ($600 + $0.10q)		3,300
Total expense		77,650
Net operating income	$	30,350

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.)

Flight Cafe

Activity Variances

For the month Ended July 31

Revenue
Exprenses
Raw Materials
Wages and Salaries
Utilities
Facility rent
Insurance
Miscellaneous
Total expense
Net operating income

Answer 1

Flight Cafe
Activity Variances
For the month Ended July 31
	Planning budget	Flexible budget	Activity variances
Revenue	104000	108000	4000	F
Exprenses:
Raw Materials	52000	54000	2000	U
Wages and Salaries	11400	11600	200	U
Utilities	3400	3450	50	U
Facility rent	3300	3300	0	None
Insurance	2000	2000	0	None
Miscellaneous	3200	3300	100	U
Total expense	75300	77650	2350	U
Net operating income	28700	30350	1650	F