Exercise 9-2 Activity Variances [LO9-2] Flight Café prepares in-flight meals for

Question

Exercise 9-2 Activity Variances [LO9-2]

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: Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) 27,000 Revenue ($4.20q) $ 113,400 Expenses: Raw materials ($2.10q) 56,700 Wages and salaries ($6,200 + $0.20q) 11,600 Utilities ($2,200 + $0.05q) 3,550 Facility rent ($3,700) 3,700 Insurance ($2,700) 2,700 Miscellaneous ($800 + $0.10q) 3,500 Total expense 81,750 Net operating income $ 31,650 In July, 28,000 actually meals were 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) 28,000 Revenue ($4.20q) $ 117,600 Expenses: Raw materials ($2.10q) 58,800 Wages and salaries ($6,200+ $0.20q) 11,800 Utilities ($2,200 + $0.05q) 3,600 Facility rent ($3,700) 3,700 Insurance ($2,700) 2,700 Miscellaneous ($800 + $0.10q) 3,600 Total expense 84,200 Net operating income $ 33,400

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.)

Explanation / Answer

Calculate the company’s activity variances for July.

Revenue 4200 F Expense Raw materials 2100 U Wages and salaries 200 U Utilities 50 U Factory rent None Insurance None Miscellaneous 100 U Total expense 2450 U Net income 1750 F

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