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)		48		48		50
Revenue ($320.00q)	$	13,650	$	15,360	$	16,000
Expenses:
Wages and salaries ($4,000 + $82.00q)		8,430		7,936		8,100
Fuel ($23.00q)		1,260		1,104		1,150
Airport fees ($650 + $38.00q)		2,350		2,474		2,550
Aircraft depreciation ($7.00q)		336		336		350
Office expenses ($190 + $2.00q)		460		286		290
Total expense		12,836		12,136		12,440
Net operating income	$	814	$	3,224	$	3,560

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

Solution Vulcan Flyovers Flexible Budget Performance Report For the Month Ended July 31 Revenue and Particulars Actual Spending Flexible Budget Activity Planning Variances Budget Variances Results Flights (q) 48 48 50 Revenue ($320.00q) Expenses: Wages and salaries ($4,000 $82.00q) Fuel ($23.00q) Airport fees ($650 $38.00q) Aircraft depreciation ($7.00q) Office expenses ($190 + $2.00q) Total expense Net operating income $1,710 U 15,360 $640 U $ 16,000 $ 13,650 7,936 164 F 8,430 494 U 8,100 1,260 156 U 1,104 46 F 1,150 124 F 2,350 2,550 2,474 76 F O None 336 336 14 F 350 460 174 U 286 4 F 290 12,836 700 U 12,136 304 F 12,440 $2,410 U $ $ 336 U$ 3,560 814 3,224 Between actual results and flexible budgets, If actual revenue is less than flexible budgets revenue then it is treated as UNFAVOURABLE If actual revenue is more than flexible budgets revenue then it is treated as FAVOURABLE If actual expenses is more than flexible budgets expenses then it is treated as UNFAVOURABLE If actual expenses is less than flexible budgets expenses then it is treated as FAVOURABLE Between flexible budgets and Planning budget, If flexible budgets revenue is less than planning budgets revenue then it is treated as UNFAVOURABLE If flexible budgets revenue is more than planning budgets revenue then it is treated as FAVOURABLE If flexible budgets expenses is more than planning budgets expenses then it is treated as UNFAVOURABLE If flexible budgets expenses is less than planning budgets expenses then it is treated as FAVOURABLE