Palamino Jeep Tours operates jeep tours in the heart of the Colorado Rockies. Th

Question

Palamino Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: In January, the company budgeted for 330 guests and 143 jeeps. The company's income statement showing the actual results for the month appears below: Prepare a flexible budget performance report showing both the company's activity variances and revenue and spending variances for January. Label each variance as favorable (F) or unfavorable

Explanation / Answer

Activity Variances:

Actuals

Standards

Difference

Guests

320

330

-10

Unfavorable

Jeeps

139

143

-4

Unfavorable

Revenue

46990

47520

-530

Unfavorable

Tour guide wages

20996

22022

-1026

Favorable

Vehicle expenses

13977

3300

10677

Unfavorable

Administrative expenses

3630

2400

1230

Unfavorable

Total expenses

38603

27722

10881

Unfavorable

Net operating income

8387

19798

-11411

Unfavorable

Standards Variable Element Total cost Variable Eliment Total Element Fixed Total Elements Per Guest for 330 Gusts Per Jeep for 143 Jeeps Element Revenue 144 47520 0 0 0 47520 Tour guid wages 0 0 154 22022 0 22022 Vehicle expenses 0 0 0 0 3300 3300 Administrative expenses 0 0 0 0 2400 2400 Total Expenditure 27722 Net Income = $19,798

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