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)		29,000
Revenue ($4.50q)	$	130,500
Expenses:
Raw materials ($2.00q)		58,000
Wages and salaries ($6,500 + $0.20q)		12,300
Utilities ($2,000 + $0.05q)		3,450
Facility rent ($3,300)		3,300
Insurance ($2,700)		2,700
Miscellaneous ($400 + $0.10q)		3,300
Total expense		83,050
Net operating income	$	47,450

In July, 30,000 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)		30,000
Revenue ($4.50q)	$	135,000
Expenses:
Raw materials ($2.00q)		60,000
Wages and salaries ($6,500+ $0.20q)		12,500
Utilities ($2,000 + $0.05q)		3,500
Facility rent ($3,300)		3,300
Insurance ($2,700)		2,700
Miscellaneous ($400 + $0.10q)		3,400
Total expense		85,400
Net operating income	$	49,600

Required:

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

Answer 1

Flight Café
Activity variances
For the Month Ended July 31
	Planning budget	Flexible budget	Activity variances
Revenue	130500	135000	4500	F
Expenses:
Raw materials	58000	60000	2000	U
Wages and salaries	12300	12500	200	U
Utilities	3450	3500	50	U
Facility rent	3300	3300	0	None
Insurance	2700	2700	0	None
Miscellaneous	3300	3400	100	U
Total expense	83050	85400	2350	U
Net operating income	47450	49600	2150	F