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) 53 53 51 Revenue ($345.00q) $ 16,200 $ 18,285 $ 17,595 Expenses: Wages and salaries ($3,300 + $91.00q) 8,081 8,123 7,941 Fuel ($30.00q) 1,760 1,590 1,530 Airport fees ($820 + $32.00q) 2,386 2,516 2,452 Aircraft depreciation ($10.00q) 530 530 510 Office expenses ($240 + $1.00q) 461 293 291 Total expense 13,218 13,052 12,724 Net operating income $ 2,982 $ 5,233 $ 4,871 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

Ans.	VULCAN FLYOVERS
	Flexible Budget Performance Report
	For the Month Of July
		Actual Results	Spending variance		Flexible Budget	Activity variance		Planning Budget
	Flights	53			53			51
	Revenue	$16,200	$2,085	U	$18,285	$690	F	$17,595
	Expenses:
	Wages and salaries	$8,081	$42	F	$8,123	$182	U	$7,941
	Fuel	$1,760	$796	U	$1,590	$60	U	$1,530
	Airport fees	$2,386	$130	F	$2,516	$64	U	$2,452
	Aircraft depreciation	$530	$0	none	$530	$20	U	$510
	Office expenses	$461	$168	U	$293	$2	U	$291
	Total expenses	$13,218	$166	U	$13,052	$328	U	$12,724
	Net operating income	$2,982	$2,251	U	$5,233	$362	F	$4,871
	*Calculation of Flexible budget & Planning budget:
		Flexible Budget	Planning budget
	Flights	53	51
	Revenue	$345 * 53	$345 * 51
	Expenses:
	Wages and salaries	$3300 + ($91*53)	$3300 + ($91*51)
	Fuel	$30 * 53	$30 * 51
	Airport fees	$820 + ($32 * 53)	$820 + ($32 * 51)
	Aircraft depreciation	$10 * 53	$10 * 51
	Office expenses	$240 + ($1 * 53)	$240 + ($1 * 51)
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	Revenue & Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in expenses from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget =   Favorable.
	*Increase in revenue or net income from flexible budget to actual results & Planning budget to flexible budget =   Favorable.
	*Decrease in revenue or net income from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.