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) 30,000 Revenue ($4.00q) $ 120,000 Expenses: Raw materials ($2.10q) 63,000 Wages and salaries ($6,300 + $0.20q) 12,300 Utilities ($2,000 + $0.05q) 3,500 Facility rent ($3,100) 3,100 Insurance ($2,700) 2,700 Miscellaneous ($500 + $0.10q) 3,500 Total expense 88,100 Net operating income $ 31,900 In July, 31,000 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) 31,000 Revenue ($4.00q) $ 124,000 Expenses: Raw materials ($2.10q) 65,100 Wages and salaries ($6,300+ $0.20q) 12,500 Utilities ($2,000 + $0.05q) 3,550 Facility rent ($3,100) 3,100 Insurance ($2,700) 2,700 Miscellaneous ($500 + $0.10q) 3,600 Total expense 90,550 Net operating income $ 33,450 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

Activity variance

Revenue (120000-124000)	4000 F
Expense
Raw material (63000-65100)	2100 U
Wages and salaries (12300-12500)	200 U
Utilities (3500-3550)	50 U
Facility rent (3100-3100)	0 None
Insurance	0 None
Miscellaneous (3500-3600)	100 U
Total expense	2450 U
Net operating income	1550 F