Flight Café is a company that prepares in-flight meals for airlines in its kitch
ID: 2475639 • Letter: F
Question
Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below:
Flight Café
Planning Budget
For the Month Ended July 31
Budgeted meals (q) 26,000
Revenue ($4.30q) $ 111,800
Expenses:
Raw materials ($2.00q) 52,000
Wages and salaries ($6,100 + $0.20q) 11,300
Utilities ($2,200 + $0.05q) 3,500
Facility rent ($3,200) 3,200
Insurance ($2,600) 2,600
Miscellaneous ($700 + $0.10q) 3,300
Total expense 75,900
Net operating income $ 35,900
In July, 27,000 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) 27,000
Revenue ($4.30q) $ 116,100
Expenses:
Raw materials ($2.00q) 54,000
Wages and salaries ($6,100 + $0.20q) 11,500
Utilities ($2,200 + $0.05q) 3,550
Facility rent ($3,200) 3,200
Insurance ($2,600) 2,600
Miscellaneous ($700 + $0.10q) 3,400
Total expense 78,250
Net operating income $ 37,850
Required:
1.
Compute 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.)
Explanation / Answer
Activity Variances
For the Month Ended July 31
Expenses:
Budgeted Actual Activity Variance F/U Meals 26000 27000 1000 F Revenue $111800 $116100 4300 FExpenses:
Raw Material 52000 54000 2000 U Wages and Salaries 11300 11500 200 U Utilities 3500 3550 50 U Facility Rent 3200 3200 0 Insurance 2600 2600 0 Miscellaneous 3300 3400 100 U Total Expenses 75900 78250 2350 U Net Operating Income 35900 37850 1950 FRelated Questions
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