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)		57		57		55
Revenue ($350.00q)	$	16,100	$	19,950	$	19,250
Expenses:
Wages and salaries ($3,600 + $91.00q)		8,745		8,787		8,605
Fuel ($32.00q)		1,990		1,824		1,760
Airport fees ($860 + $30.00q)		2,460		2,570		2,510
Aircraft depreciation ($10.00q)		570		570		550
Office expenses ($220 + $1.00q)		445		277		275
Total expense		14,210		14,028		13,700
Net operating income	$	1,890	$	5,922	$	5,550

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.)

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Answer 1

			Flexible budget performance
			Actual	Revenue & spending		Flexible	Activity variance		planning
				variance		budget			budget
Flights			57			57			55
Revenue			16,100	3,850	U	19,950	700	F	19,250
expenses
Wages and salaries			8,745	42	F	8,787	182	U	8,605
Fuel			1,990	166	U	1,824	64	U	1,760
Airport fees			2,460	110	F	2,570	60	U	2,510
Aircraft depreciation			570	0	N	570	20	U	550
office expenses			445	168	U	277	2	U	275
total expense			14,210	182	U	14,028	328	U	13,700
net operating income			1,890	4,032	U	5,922	372	F	5,550