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 Flexible Planning Results Budget Budget 58 58 56 Flights (9) $ 16,400 $ 20,010 $ 19,320 Revenue ($345.00g) Expenses: Wages and salaries ($3,700 + $88.009) Fuel ($32.009) Airport fees ($840 + $33.009) Aircraft depreciation ($9.00) office expenses ($210 + $1.00q) Total expense 8,768 8,804 2,022 1,856 2,624 2,754 522 522 436 268 14,372 14,204 $ 2,028 $ 5,806 8,628 1,792 2,688 504 266 13,878 $ 5,442 Net operating income 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 Ended JULY 31
		Actual Results	Spending variance		Flexible Budget	Activity variance		Planning Budget
	Flights	58			58			56
	Revenue	$16,400	$3,610	U	$20,010	$690	F	$19,320
	Expenses:
	Wages and salaries	$8,768	$36	F	$8,804	$176	U	$8,628
	Fuel	$2,022	$166	U	$1,856	$64	U	$1,792
	Airport fees	$2,624	$130	F	$2,754	$66	U	$2,688
	Aircraft depreciation	$522	$0	none	$522	$18	U	$504
	Office expenses	$436	$168	U	$268	$2	U	$266
	Total expenses	$14,372	$168	U	$14,204	$326	U	$13,878
	Net operating income	$2,028	$3,778	U	$5,806	$364	F	$5,442
	*Flexible budget is prepared on the basis of actual units.
	*Fixed costs remain constant on each level of sales.
	Revenue & Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in revenue or net operating income and decrease in expenses from Planning budget to Flexible budget and flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from Planning budget to flexible budget and flexible budget to actual results =   Unfavorable.