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 Café
Planning Budget
For the Month Ended July 31
Budgeted meals (q)		27,000
Revenue ($4.30q)	$	116,100
Expenses:
Raw materials ($1.80q)		48,600
Wages and salaries ($6,500 + $0.20q)		11,900
Utilities ($2,100 + $0.05q)		3,450
Facility rent ($3,500)		3,500
Insurance ($2,900)		2,900
Miscellaneous ($900 + $0.10q)		3,600
Total expense		73,950
Net operating income	$	42,150

In July, 28,000 meals were actually served. The company’s flexible budget for this level of activity appears below:

Flight Café
Flexible Budget
For the Month Ended July 31
Budgeted meals (q)		28,000
Revenue ($4.30q)	$	120,400
Expenses:
Raw materials ($1.80q)		50,400
Wages and salaries ($6,500+ $0.20q)		12,100
Utilities ($2,100 + $0.05q)		3,500
Facility rent ($3,500)		3,500
Insurance ($2,900)		2,900
Miscellaneous ($900 + $0.10q)		3,700
Total expense		76,100
Net operating income	$	44,300

Required:

1. Calculate the company’s activity variances for July. (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

ANSWER

	Flexible budget	Planning budget	Activity variances
Revenue	120400	116100	4300	F
Expenses:
Raw materials	53200	51300	1900	U
Wages and salaries	12100	11900	200	U
Utilities	3300	3250	50	U
Facility rent	3800	3800	0	None
Insurance	2300	2300	0	None
Miscellaneous	3600	3500	100	U
Total expense	78300	76050	2250	U
Net operating income	42100	40050	2050	F

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