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)		59		59		57
Revenue ($355.00q)	$	16,300	$	20,945	$	20,235
Expenses:
Wages and salaries ($3,400 + $86.00q)		8,442		8,474		8,302
Fuel ($33.00q)		2,111		1,947		1,881
Airport fees ($850 + $34.00q)		2,746		2,856		2,788
Aircraft depreciation ($9.00q)		531		531		513
Office expenses ($240 + $1.00q)		467		299		297
Total expense		14,297		14,107		13,781
Net operating income	$	2,003	$	6,838	$	6,454

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.)

Vulcan Flyovers Flexible Budget Performance Report For the Month Ended July 31 Revenue and Spending Flexible Variances Budget Actual Results Activity Variances Planning Budget 57 Flights 59 59 Revenue $ 16,300 $ 20,945 $ 20,235 Expenses: Wages and salaries 8,442 8,474 8,302 Fuel 2,111 1,947 1,881 2,746 2,856 2,788 531 531 513 Airport fees Aircraft depreciation Office expenses Total expense 467 299 297 14,297 14,107 13,781 Net operating income $ 2,003 $ 6,838 $ 6,454

Answer 1

	Actual results	Revenue and Spending variance		Flexible Budget	Activity Variance		Planning Budget
Flights	59			59			57
Revenue	$16,300	$4,645	U	$20,945	$710	F	$20,235
Expenses:
...Wages and salaries	$8,442	$32	F	$8,474	$172	U	$8,302
...Fuel	$2,111	$164	U	$1,947	$66	U	$1,881
...Airport Fees	$2,746	$110	F	$2,856	$68	U	$2,788
...Aircraft Depreciation	$531	$0		$531	$18	U	$513
...Office Expenses	$467	$168	U	$299	$2	U	$297
Total expenses	$14,297	190	U	$14,107	$326	U	$13,781
Net Operating Income	$2,003	$4,835	U	$6,838	$384	F	$6,454

Actual Results - Flexible budget = Revenue and Spending variance

Flexible budget - Planning Budget = Activity Variance

If actual revenue is more than the Budgeted revenue, then variance is Favorable (F) or Vice Versa.

If actual expenses is more than the budgeted expenses, then varance is Unfavorable (U) or Vice Versa.