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:

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.)

Vulcan Flyovers Operating Data For the Month Ended July 31 Actual
Results Flexible
Budget Planning
Budget Flights (q) 58 58 56 Revenue ($355.00q) $ 16,000 $ 20,590 $ 19,880 Expenses: Wages and salaries ($3,700 + $85.00q) 8,600 8,630 8,460 Fuel ($31.00q) 1,966 1,798 1,736 Airport fees ($880 + $33.00q) 2,649 2,794 2,728 Aircraft depreciation ($10.00q) 580 580 560 Office expenses ($210 + $1.00q) 436 268 266 Total expense 14,231 14,070 13,750 Net operating income $ 1,769 $ 6,520 $ 6,130

Explanation / Answer

Actual results Flexible Budget Variance Effect Activity variance: Flights (q) 58 58 0 None Revenue Variance: Revenue ($355.00q) 16,000 20,590 4,590 U Spending Variance: Wages and salaries ($3,700 + $85.00q) 8,600 8,630 30 F Fuel ($31.00q) 1,966 1,798 168 U Airport fees ($880 + $33.00q) 2,649 2,794 145 F Aircraft depreciation ($10.00q) 580 580 0 None Office expenses ($210 + $1.00q) 436 268 168 U Total expense 14,231 14,070 161 U Net operating income 1,769 6,520 4,751 U

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