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 (9) 22,000 Revenue ($4.40) $ 96,800 50,600 Expenses: Raw materials ($2.309) Wages and salaries ($6,400 + $0.20) Utilities ($1,900 + $0.059) Facility rent ($3,400) Insurance ($2,600) Miscellaneous ($600 + $0.100) 10,800 3,000 3,400 2,600 2,800 Total expense 73,200 Net operating income $23,600 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 (9) 23,000 Revenue ($4.409) $ 101,200 52,900 Expenses: Raw materials ($2.300) Wages and salaries ($6,400 + $0.209) Utilities ($1,900 + $0.059) Facility rent ($3,400) Insurance ($2,600) Miscellaneous ($600 + $0.100) 11,000 3,050 3.400 2,600 2,900

Answer 1

Answer:

Flight Case
Activity Variances
For the month Ended July 31
Revenue	$4,400	F
Expenses:
Raw materials	$2,300	U
Wages and Salaries	$200	U
Utilities	$50	U
Facility rent	$0	None
Insurance	$0	None
Miscellaneous	$100	U
Total expenses	$2,650	U
Net operating income	$1,750	F

Calculations:

	Flexible Budget	Activity Variances		Planing Budget
Revenue	$101,200	$4,400	Favorable	$96,800
Expenses:
Raw materials	$52,900	$2,300	Unfavorable	$50,600
Wages and Salaries	$11,000	$200	Unfavorable	$10,800
Utilities	$3,050	$50	Unfavorable	$3,000
Facility rent	$3,400	$0	None	$3,400
Insurance	$2,600	$0	None	$2,600
Miscellaneous	$2,900	$100	Unfavorable	$2,800
Total expenses	$75,850	$2,650	Unfavorable	$73,200
Net operating income	$25,350	$1,750	Favorable	$23,600

i.Difference between the Flexible and Planning budget is 'Activity variances'

ii.If FLEXIBLE Budget's Revenues & Net Operating income is more than the PLANNING Budget, Then it's favorable otherwise Unfavorable

iii.If FLEXIBLE Budgets's Expenses are less than the PLANNING budget, Then it's Favorable otherwise Unfavorable