Flight Café prepares in-flight meals for airlines in its kitchen located next to

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:

In July, 25,000 actually meals were served. The company’s flexible budget for this level of activity appears below:

Required:

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

Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) 24,000 Revenue ($4.30q) $ 103,200 Expenses: Raw materials ($2.30q) 55,200 Wages and salaries ($6,400 + $0.20q) 11,200 Utilities ($2,100 + $0.05q) 3,300 Facility rent ($3,900) 3,900 Insurance ($2,400) 2,400 Miscellaneous ($500 + $0.10q) 2,900 Total expense 78,900 Net operating income $ 24,300

Explanation / Answer

Planning Activity variances Flexible Budgeted meals (q) 24,000 25000 Revenue ($4.30q) 1,03,200 4,300 F 107500 Expenses: Raw materials ($2.30q) 55,200 2,300 U 57500 Wages and salaries ($6,400 + $0.20q) 11,200 200 U 11400 Utilities ($2,100 + $0.05q) 3,300 50 U 3350 Facility rent ($3,900) 3,900 0 None 3900 Insurance ($2,400) 2,400 0 None 2400 Miscellaneous ($500 + $0.10q) 2,900 100 U 3000 Total expense 78,900 2,650 U 81550 Net operating income 24,300 1,650 F 25,950

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