Exercise 9-4 Prepare a Flexible Budget Performance Report [LO9-4] Vulcan Flyover

Question

Exercise 9-4 Prepare a Flexible Budget Performance Report [LO9-4]

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below: Vulcan Flyovers Operating Data For the Month Ended July 31 Actual Results Flexible Budget Planning Budget Flights (q) 54 54 52 Revenue ($345.00q) $ 16,300 $ 18,630 $ 17,940 Expenses: Wages and salaries ($3,500 + $88.00q) 8,216 8,252 8,076 Fuel ($34.00q) 1,998 1,836 1,768 Airport fees ($830 + $34.00q) 2,541 2,666 2,598 Aircraft depreciation ($10.00q) 540 540 520 Office expenses ($240 + $1.00q) 462 294 292 Total expense 13,757 13,588 13,254 Net operating income $ 2,543 $ 5,042 $ 4,686 The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required: 1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Flights 54 54 52 Revenue 16300 2330 U 18630 690 F 17940 Expenses: Wages and salaries 8216 36 F 8252 176 U 8076 Fuel 1998 162 U 1836 68 U 1768 Airport fees 2541 125 F 2666 68 U 2598 Aircraft depreciation 540 0 None 540 20 U 520 Office expenses 462 168 U 294 2 U 292 Total expense 13757 169 U 13588 334 U 13254 Net operating income 2543 2499 U 5042 356 F 4686

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