Question

9-2

Exercise 9-2 Activity Variances [LO9-2] Flight Cafe 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 Cafe Planning Budget For the Month Ended July 31 Budgeted meals (a) $117, ese 46,80 11.50 Revenue (14.509) Expenses: Raw waterials ($1.889) Wages and salaries (56,400 + $.209) Utilities (51,800 $0.05) Facility rent ($3,400) Insurance ($2,000) Miscellaneous ($500 $0.109) Total expense Net operating income 3,40 2.00 70.100 In July, 27,000 meals were actually served. The company's flexible budget for this level of activity appears below. Flight Cafe Flexible Budget For the Month Ended July 31 Budgeted meals (9) 27.000 Revenue (54.5 ) $121, see Raw materials (51. ) Wapes and salaries (16,400.50.200) utilities ($1,800 $0.05) Facility rent (13,400) Insurance (52,00) Miscellaneous (560050.100) Total expense Net operating income Required: 1 Calculate the company's activity variances for July (indicate the effect of each variance by selecting unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values.) for favorable, "U" for Activity Variances For the Month Ended July 31 Expenses Raw materials Wages and salaries Uits Fayrent Insurance Miscellaneous Total expense Net certng income

Answer 1

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Flight Cafe
Activity Variances
For the month ended July 31
	Activity Variance
Revenue	$                            4,500	F
Expenses:
Raw material	$                            1,800	U
Wages and Salaries	$                                200	U
Utilities	$                                  50	U
Facility rent	0	None
Insurance	0	None
Miscellaneous	$                                100	U
Total expense	$                            2,150	U
Net operating income	$                            2,350	F
Workings:
Flight Cafe
Activity Variances
For the month ended July 31
	Planning Budget	Flexible Budget	Activity Variance
Revenue	$                      1,17,000	$ 1,21,500	$   4,500	F
Expenses:
Raw material	$                          46,800	$     48,600	$   1,800	U
Wages and Salaries	$                          11,600	$     11,800	$       200	U
Utilities	$                            3,100	$       3,150	$         50	U
Facility rent	$                            3,400	$       3,400	$          -	None
Insurance	$                            2,000	$       2,000	$          -	None
Miscellaneous	$                            3,200	$       3,300	$       100	U
Total expense	$                          70,100	$     72,250	$   2,150	U
Net operating income	$                          46,900	$     49,250	$   2,350	F