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)		58		58		56
Revenue ($355.00q)	$	16,300	$	20,590	$	19,880
Expenses:
Wages and salaries ($3,500 + $89.00q)		8,624		8,662		8,484
Fuel ($33.00q)		2,078		1,914		1,848
Airport fees ($870 + $33.00q)		2,664		2,784		2,718
Aircraft depreciation ($8.00q)		464		464		448
Office expenses ($240 + $1.00q)		466		298		296
Total expense		14,296		14,122		13,794
Net operating income	$	2,004	$	6,468	$	6,086

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.)

Answer 1

1. Flexible budget performance report for July is as follows:

А в DE Calculation of Revenue and Spending Variance Actual results Flexible Budget Variance 3 Revenue 16300 20590 =C3-B3U 4 Expenses: 5 Wages & Salaries 8624 8662 =C5-B5 6 Fuel 2078 1914 =B6-C6 U 7 Airport Fees 2664 2784 =C7-B7 F 8 Aircraft Depriciation 464 464 =C8-B8 None 9 Office Expenses 298 =B9-C9U 10 Total Expenses =SUM(B5:B9) =SUM(C5:09) =B10-C10U 11 Net Operating Income =B3-B10 =C3-C10 =C11-B11 U 466 12 14 13 Calculation of Activity Variances Flexible Budget Planning Budget Activity Variance 15 Revenue 20590 19880 =B15-C15 F 16 Expenses: 17 Wages & Salaries 8662 8484 =B17-C17U 18 Fuel 1914 1848 =B18-C18 U 19 Airport Fees 2784 2718 =B19-C19 U 20 Aircraft Depriciation 464 =B20-C20 U 21 Office Expenses 298 296 =B21-C21 U 22 Total Expenses =SUM(B17:B21) =SUM(C17:C21) =B22-C22 U 23 Net Operating Income =B15-B22 =C15-C22 =B23-C23 F 448

Resulting excel sheet is as follows:

B DE Calculation of Revenue and Spending Variance Actual results Flexible Budget Variance 3 Revenue 16300 205904290 U 4 Expenses: 5 Wages & Salaries 8624 8662 38 F 6 Fuel 2078 1914 164 U 7 Airport Fees 2664 2784 120 F 8 Aircraft Depriciation 464 0 None 9 Office Expenses 466 298 168 U 10 Total Expenses 14296 14122 174 U 11 Net Operating Income 2004 6468 4464 U 464 12 13 Calculation of Activity Variances Planning Activity Flexible Budget 14 Budget Variance 15 Revenue 20590 19880 710 F 16 Expenses: 17 Wages & Salaries 8662 8484 178 U 18 Fuel 1914 1848 66! U 19 Airport Fees 2784 2718 66 U 20 Aircraft Depriciation 464 448 16 U 21 Office Expenses 298 2 U 22 Total Expenses 14122 13794 328 U 23 Net Operating Income 6468 6086 382 F 296