Question

Flight Café prepares in-flight meals for airlines and its planning budget for July appears below:

Flight Café
Planning Budget
For the Month Ended July 31
Budgeted meals (q) 18,000
Revenue ($4.50q) $ 81,000
Expenses:
Raw materials ($2.40q) 43,200
Wages and salaries ($5,200 + $0.30q) 10,600
Utilities ($2,400 + $0.05q) 3,300
Facility rent ($4,300) 4,300
Insurance ($2,300) 2,300
Miscellaneous ($680 + $0.10q) 2,480
Total expenses 66,180
Net operating income $ 14,820
In July, 17,800 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) 17,800
Revenue ($4.50q) $ 80,100
Expenses:
Raw materials ($2.40q) 42,720
Wages and salaries ($5,200 + $0.30q) 10,540
Utilities ($2,400 + $0.05q) 3,290
Facility rent ($4,300) 4,300
Insurance ($2,300) 2,300
Miscellaneous ($680 + $0.10q) 2,460
Total expenses 65,610
Net operating income $ 14,490
Required:
1. Calculate the company’s activity variances for July.

Note: 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.

Fill the activity variances out for the month ended in july 31

Revenue: (900) (U)
Expenses:
Raw Materials: [blank] [F]
Wages and Salaries: [blank] [ F]
Facility Rent: [blank][none]
Insurance: [blank][none]
Miscellaneous: [blank:[F]
Total Expenses: [blank]F]
Net operating income: (330) [U]

Answer 1

To calculate the activity variances, we'll compare the flexible budget figures with the planning budget figures for each category. The activity variance is calculated as follows:

**Activity Variance = Flexible Budget Amount - Planning Budget Amount**

Let's compute the variances for each category:

### Revenue
- Flexible Budget Revenue = $80,100
- Planning Budget Revenue = $81,000
- **Variance = $80,100 - $81,000 = -$900 (U)**

### Raw Materials
- Flexible Budget Raw Materials = $42,720
- Planning Budget Raw Materials = $43,200
- **Variance = $42,720 - $43,200 = $480 (F)**

### Wages and Salaries
- Flexible Budget Wages and Salaries = $10,540
- Planning Budget Wages and Salaries = $10,600
- **Variance = $10,540 - $10,600 = $60 (F)**

### Facility Rent
- Flexible Budget Facility Rent = $4,300
- Planning Budget Facility Rent = $4,300
- **Variance = $4,300 - $4,300 = $0 (None)**

### Insurance
- Flexible Budget Insurance = $2,300
- Planning Budget Insurance = $2,300
- **Variance = $2,300 - $2,300 = $0 (None)**

### Miscellaneous
- Flexible Budget Miscellaneous = $2,460
- Planning Budget Miscellaneous = $2,480
- **Variance = $2,460 - $2,480 = $20 (F)**

### Total Expenses
- Flexible Budget Total Expenses = $65,610
- Planning Budget Total Expenses = $66,180
- **Variance = $65,610 - $66,180 = $570 (F)**

### Net Operating Income
- Flexible Budget Net Operating Income = $14,490
- Planning Budget Net Operating Income = $14,820
- **Variance = $14,490 - $14,820 = -$330 (U)**

Now let's fill out the activity variances:

- **Revenue:** $(900) (U)
- **Raw Materials:** $480 (F)
- **Wages and Salaries:** $60 (F)
- **Facility Rent:** $0 (None)
- **Insurance:** $0 (None)
- **Miscellaneous:** $20 (F)
- **Total Expenses:** $570 (F)
- **Net Operating Income:** $(330) (U)

So the filled variances are as follows:

### Activity Variances
- Revenue: (900) (U)
- Expenses:
- Raw Materials: 480 (F)
- Wages and Salaries: 60 (F)
- Facility Rent: 0 (None)
- Insurance: 0 (None)
- Miscellaneous: 20 (F)
- Total Expenses: 570 (F)
- Net Operating Income: (330) (U)