Question

Cryan Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:

	Fixed element per month			Variable element per guest			Variable element per jeep
Revenue	$	0		$	277		$	0
Tour guide wages	$	0		$	0		$	155
Vehicle expenses	$	6,200		$	21		$	76
Administrative expenses	$	2,700		$	20		$	0

In May, the company budgeted for 527 guests and 232 jeeps. The company's income statement showing the actual results for the month appears below:

Cryan Jeep Tours
Income Statement
For the Month Ended May 31
Actual guests		542
Actual jeeps		227
Revenue	$	117,854
Expenses:
Tour guide wages		37,957
Vehicle expenses		23,640
Administrative expenses		10,888
Total expense		72,485
Net operating income	$	45,369

Required:

Prepare a report showing the company's revenue and spending variances for May. Label each variance as favorable (F) or unfavorable (U).

Answer 1

Cryan Jeep Tours
Revenue and spending variances
For the Month Ended May 31
	Actual results	Flexible Budget	Revenue and spending variances
Guests	542	542
Jeeps	227	227
Revenue	117854	150134	32280	U
Expenses:
Tour guide wages	37957	35185	2772	U
Vehicle expenses	23640	34834	11194	F
Administrative expenses	10888	13540	2652	F
Total expense	72485	83559	11074	F
Net operating income	45369	66575	21206	U
Workings:
	Flexible Budget
Revenue	150134	=542*277
Expenses:
Tour guide wages	35185	=227*155
Vehicle expenses	34834	=6200+(542*21)+(227*76)
Administrative expenses	13540	=2700+(542*20)