Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,500 pounds of oysters in August. The company’s flexible budget for August appears below:

Quilcene Oysteria
Flexible Budget
For the Month Ended August 31
Actual pounds (q)		7,500
Revenue ($4.15q)	$	31,125
Expenses:
Packing supplies ($0.30q)		2,250
Oyster bed maintenance ($3,300)		3,300
Wages and salaries ($2,100 + $0.40q)		5,100
Shipping ($0.75q)		5,625
Utilities ($1,260)		1,260
Other ($430 + $0.01q)		505
Total expense		18,040
Net operating income	$	13,085

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,500
Revenue	$	27,200
Expenses:
Packing supplies		2,420
Oyster bed maintenance		3,160
Wages and salaries		5,510
Shipping		5,355
Utilities		1,070
Other		1,125
Total expense		18,640
Net operating income	$	8,560

Required:

Calculate the company’s revenue and spending variances for August. (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.)

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 85 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month			Cost per Cruise			Cost per Passenger
Vessel operating costs	$	6,100		$	471.00		$	3.40
Advertising	$	2,900
Administrative costs	$	5,900		$	31.00		$	1.50
Insurance	$	3,300

For example, vessel operating costs should be $6,100 per month plus $471.00 per cruise plus $3.40 per passenger. The company’s sales should average $34.00 per passenger. In July, the company provided 57 cruises for a total of 3,000 passengers.

Required:

Prepare the company’s flexible budget for July.

Answer 1

			Actual	Flexible	Revenue and spending
			results	budget	variance
Actual pounds			7,500	7,500
Revenue			27,200	31,125	3,925	U
expenses:
packing supplies			2,420	2,250	170	U
oyster bed maintenance			3,160	3,300	140	F
wages and salaries			5,510	5,100	410	U
shipping			5,355	5,625	270	F
utilities			1,070	1,260	190	F
other			1,125	505	620	U
total expense			18,640	18,040	600	U
net operating income			8,560	13,085	4,525	U

		Alyeski tours
		Flexible budget
		for the month ended July 31
Revenue						102000
Expenses
Vessel operating costs						43147
Advertising						2,900
Administrative costs						12167
insurance						3,300
total expense						61514
Net operating income						40486