Mt. Hood Air offers scenic overflights of Mt. Hood and the Columbia River gorge. Data concerning the company’s operations in August appear below:
Mt. Hood Air Operating Data For the Month Ended August 31 | |||
| Planning Budget | Flexible Budget | Actual Results |
Flights(q) | 50 | 52 | 52 |
Revenue ($360,00q) | $18,000 | $18,720 | $16,980 |
Expenses: | |||
Wages and salaries ($3,800 + $92 . 00q) | 8,400 | 8,584 | 8,540 |
Fuel (S 34,00q) | 1,700 | 1,768 | 1.930 |
Airport fees ($ 870 + S 35 . 00q) | 2,620 | 2,690 | 2,690 |
Aircraft depreciation ($11.00q) | 550 | 572 | 572 |
Office expenses ($ 230 + $1.00q) | 280 | 282 | 450 |
Total expense | 13,550 | 13,896 | 14,182 |
Net operating income | $4,450 | $ 4,824 | $ 2,798 |
The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an over flight at a discount.
Required:
1. Prepare a flexible budget performance report for August.
2. Which of the variances should be of concern to management? Explain.
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