1. Prepare flexible budgets for the company based on the following activity levels:

(a) 32 000 air-kilometres.

(b) 35 000 air-kilometres.

(c) 38 000 air-kilometres.

2. How to prepare a revised performance report showing the proper variances for April, based on the flexible budget that you prepared.

Fantastic Sky Tours Pty Ltd Performance Report for the month of April 2020 Formula Static Actual flexible budget budget (per air-km) (32 000 air-km) Variance (35 000 air-km) Passenger revenue $3.50 $112.000 $122 500 $10 500 U Less Variable costs: Fuel 0.50 17 000 17 500 500 F Aircraft maintenance 0.75 23 500 26 250 2 750 F Flight crew salaries 0.40 13 100 14 000 Selling and administration 0.80 24 900 28 000 900 F 3 100 F Total variable expenses $2.45 $ 78 500 $ 85 750 $ 7 250 F Contribution margin $1.05 $ 33 500 $ 36 750 $ 3 250 U Less Fixed costs: Depreciation on aircraft $2.900 $ 2,900 $ 2 900 $ 0 Landing fees 900 1 000 900 100 U Supervisory salaries 9 000 8 600 Selling and administrative 11 000 12 400 9 000 11 000 400 F 1 400 U Total fixed expenses $23 800 $ 24 900 Net profit $ 8 600 $ 23 800 $ 12.950 $ 1100 U $ 4350 U