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: [blank](U)
Net operating income: [blank] [U]

Answer 1

To calculate the activity variances for July, we will compare the flexible budget amounts with the planning budget amounts based on the actual level of activity (17,800 meals).

**Flight Café**
**Activity Variance Analysis**
For the Month Ended July 31

1. **Revenue Variance:**
- Flexible budget revenue at 17,800 meals = $80,100
- Planning budget revenue at 18,000 meals = $81,000
- Revenue Variance = Flexible Budget Revenue - Planning Budget Revenue = $80,100 - $81,000 = **-$900** (Unfavorable)

2. **Total Expenses:**
- Flexible budget expenses at 17,800 meals = $65,610
- Planning budget expenses at 18,000 meals = $66,180
- Expense Variance = Flexible Budget Expenses - Planning Budget Expenses = $65,610 - $66,180 = **$570** (Favorable)

3. **Net Operating Income Variance:**
- Flexible budget net operating income at 17,800 meals = $14,490
- Planning budget net operating income at 18,000 meals = $14,820
- Net Operating Income Variance = Flexible Budget Net Operating Income - Planning Budget Net Operating Income = $14,490 - $14,820 = **-$330** (Unfavorable)

**Summary of Activity Variances:**
- Revenue: **$900 (U)**
- Net operating income: **$330 (U)**

### Summary Table
| Item | Variance Amount | Effect |
|---------------------------|------------------|--------|
| Revenue | $900 | U |
| Net operating income | $330 | U |