Question

Exercise 9-4 Prepare a Flexible Budget Performance Report [LO9-4]

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)		52		52		50
Revenue ($345.00q)	$	16,000	$	17,940	$	17,250
Expenses:
Wages and salaries ($3,600 + $89.00q)		8,190		8,228		8,050
Fuel ($34.00q)		1,930		1,768		1,700
Airport fees ($850 + $33.00q)		2,426		2,566		2,500
Aircraft depreciation ($8.00q)		416		416		400
Office expenses ($220 + $1.00q)		440		272		270
Total expense		13,402		13,250		12,920
Net operating income	$	2,598	$	4,690	$	4,330

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 Actual Results Flexible Budget Planning Budget Flights 52 52 50 Revenue $16,000 $17,940 $17,250 Expenses: Wages and salaries 8,190 8,228 8,050 Fuel 1,930 1,768 1,700 Airport fees 2,426 2,566 2,500 Aircraft depreciation 416 416 400 Office expenses 440 272 270 Total expense 13,402 13,250 12,920 Net operating income $2,598 $4,690 $4,330

Answer 1

	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Flights	52			52			50
Revenue	16000	1940	U	17940	690	F	17250
Expenses:
Wages and salaries	8190	38	F	8228	178	U	8050
Fuel	1930	162	U	1768	68	U	1700
Airpost fees	2426	140	F	2566	66	U	2500
Aircraft depreciation	416	0	None	416	16	U	400
Office expenses	440	168	U	272	2	U	270
Total expense	13402	152	U	13250	330	U	12920
Net operating income	2598	2092	U	4690	360	F	4330