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 Cafe Planning Budget For the Month Ended July 31 Budgeted meals (9) 29,080 $88,880 Revenue ($4.489) Expenses: Raw materials ($2.109) Wages and salaries ($6,199 + $0.289) Utilities ($2,280 + $.859) Facility rent ($3,200) Insurance ($2.ee) Miscellaneous ($480 + $0.189) Total expense Net operating income 42.989 18, 18e 3.280 3, 2ee 2.189 2.480 63,eee $25,000 In July, 21.000 meals were actually served. The company's flexible budget for this level of activity appears below: Flight Cafe Flexible Budget For the Month Ended July 31 Budgeted meals (9) 21,880 $92,480 Revenue ($4.489) Expenses: Raw materials ($2.109) Wages and salaries ($6,108+ $0.289) Utilities ($2,280 + $0.859) Facility rent ($3,200) Insurance ($2,100) Miscellaneous ($480 + $0.189) Total expense Net operating income 44,1ee 10,380 3,250 3, 2ee 2,100 2.580 65,450 $26,95€ Required: 1. Calculate the company's activity variances for July (Indicate the effect of each varlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero varlance). Input all amounts as positive values.) Flight Café Activity Variances For the Month Ended July 31 Revenue Expenses Raw materials Wages and salaries Utilities Facility rent Insurance Miscellaneous Total expense Net operating income

Answer 1

Ans.	FLIGHT   CAFÉ
	Activity Variances
	For the Month Ended July 31
		Flexible Budget	Activity variance		Planning Budget
	Meals	21,000			20,000
	Revenue	$92,400	$4,400	F	$88,000
	Expenses:
	Raw materials	$44,100	$2,100	U	$42,000
	Wages and salaries	$10,300	$200	U	$10,100
	Utilities	$3,250	$50	U	$3,200
	Facility rent	$3,200	$0	none	$3,200
	Insurance	$2,100	$0	none	$2,100
	Miscellaneous	$2,500	$100	U	$2,400
	Total expenses	$65,450	$2,450	U	$63,000
	Net operating income	$26,950	$1,950	F	$25,000
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	Activity variance =   Flexible budget - Planning budget
	*Increase in revenue or net operating income from planning budget to flexible budget   =   Favorable.
	*Decrease in revenue or net operating income from planning budget to flexible budget =   Unfavorable.
	*Increase in expenses from Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from Planning budget to flexible budget =   Favorable.