Prepare a Report Showing Activity Variances [LO2]

Air Meals is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for December appears below:

In December, 21,000 meals were actually served. The company’s flexible budget for this level of activity is as follows:

Required:
1. Prepare a report showing the company’s activity variances for December.
2. Which of the activity variances should be of concern to management? Explain.

Transcribed Image Text:

Air Meals Planning Budget For the Month Ended December 31 Budgeted meals (q)..... 20,000 Revenue ($3.80q).. $76,000 Expenses: Raw materials ($2.30g). 46,000 Wages and salaries ($6,400 + $0.25q). 11,400 Facility rent ($3,800).. Utilities ($2,100 + $0.05q). Insurance ($2,600). Miscellaneous ($700 + $0.10q). 3,100 3,800 2,600 2,700 Total expense. Net operating income. 69,600 $ 6,400