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)		24,000
Revenue ($4.40q)	$	105,600
Expenses:
Raw materials ($2.30q)		55,200
Wages and salaries ($6,400 + $0.20q)		11,200
Utilities ($1,900 + $0.05q)		3,100
Facility rent ($3,000)		3,000
Insurance ($2,800)		2,800
Miscellaneous ($900 + $0.10q)		3,300
Total expense		78,600
Net operating income	$	27,000

In July, 25,000 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)		25,000
Revenue ($4.40q)	$	110,000
Expenses:
Raw materials ($2.30q)		57,500
Wages and salaries ($6,400+ $0.20q)		11,400
Utilities ($1,900 + $0.05q)		3,150
Facility rent ($3,000)		3,000
Insurance ($2,800)		2,800
Miscellaneous ($900 + $0.10q)		3,400
Total expense		81,250
Net operating income	$	28,750

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.)

Answer 1

	Planning Budget	Flexible Budget	Activity variances
Revenue	105600	110000	4400	F
Expenses:
Raw materials	55200	57500	2300	U
Wages and salaries	11200	11400	200	U
Utilities	3100	3150	50	U
Facility rent	3000	3000	0	None
Insurance	2800	2800	0	None
Miscellaneous	3300	3400	100	U
Total expense	78600	81250	2650	U
Net operating income	27000	28750	1750	F