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: Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) 28,000 Revenue ($4.20q) Expenses: $117,600 Raw materials ($2.30q) Wages and salaries ($6,300 $0.20q) Utilities ($2,200$0.05q) Facility rent ($3,300) Insurance ($2,700) Miscellaneous ($500 $0.10q) 64,400 11,900 3,600 3,300 2,700 3,300 89,200 $ 28,400 Total expense Net operating income In July, 29,000 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) 29,000 Revenue ($4.20q) Expenses: $121,800 Raw materials ($2.30q) Wages and salaries ($6,300+ $0.20q) Utilities ($2,200$0.05q) Facility rent ($3,300) Insurance ($2,700) Miscellaneous ($500 $0.10q) 66,700 12,100 3,650 3,300 2,700 3,400 91,850 $ 29,950 Total expense Net operating income 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

1) Flights Cafe Activity Variances

For the month of July (Amounts in $)

Particulars Planning Budget (A) Flexible Budget (B) Activity Variances (A-B) Meals 28,000 29,000 Revenue ($4.20q) 117,600 121,800 4,200 F Expenses: Raw Materials ($2.30q) 64,400 66,700 2,300 U Wages and Salaries ($6,300+$0.20q) 11,900 12,100 200 U Utilities ($2,200+$0.05q) 3,600 3,650 50 U Facility Rent ($3,300) 3,300 3,300 0 None Insurance ($2,700) 2,700 2,700 0 None Miscellaneous ($500+$0.10q) 3,300 3,400 100 U Total Expens 89,200 91,850 2,650 U Net Operating Income 28,400 29,950 1,550 F

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