EXERCISE 92 Prepare a Report Showing Activity Variances [LO92] Flight Caf is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The companys planning budget for July appears below: Required: 1. Prepare a report showing the companys activity variances for July. 2. Which of the activity variances should be of concern to management? Explain.

Flight Caf Planning Budget For the Month Ended July 31 Budgeted meals ( q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Revenue ($4.50 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $81,000 Expenses: Raw materials ($2.40 q ) . . . . . . . . . . . . . . . . . . . . . . . . . 43,200 Wages and salaries ($5,200 1 $0.30 q ) . . . . . . . . . . . . . 10,600 Utilities ($2,400 1 $0.05 q ) . . . . . . . . . . . . . . . . . . . . . . . 3,300 Facility rent ($4,300) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 Insurance ($2,300) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300 Miscellaneous ($680 1 $0.10 q ) . . . . . . . . . . . . . . . . . . . 2,480 Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,180 Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,820 In July, 17,800 meals were actually served. The companys flexible budget for this level of activity appears below:

Flight Caf Flexible Budget For the Month Ended July 31 Budgeted meals ( q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,800 Revenue ($4.50 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,100 Expenses: Raw materials ($2.40 q ) . . . . . . . . . . . . . . . . . . . . . . . . . 42,720 Wages and salaries ($5,200 1 $0.30 q ) . . . . . . . . . . . . . 10,540 Utilities ($2,400 1 $0.05 q ) . . . . . . . . . . . . . . . . . . . . . . . 3,290 Facility rent ($4,300) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 Insurance ($2,300) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300 Miscellaneous ($680 1 $0.10 q ) . . . . . . . . . . . . . . . . . . . 2,460 Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,610 Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,490

EXERCISE 93 Prepare a Report Showing Revenue and Spending Variances [LO93] Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 pounds of oysters in August. The companys flexible budget for August appears below:

Quilcene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds ( q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 Revenue ($4.00 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,000 Expenses: Packing supplies ($0.50 q ) . . . . . . . . . . . . . . . . . . . . . . . 4,000 Oyster bed maintenance ($3,200) . . . . . . . . . . . . . . . . . 3,200 Wages and salaries ($2,900 1 $0.30 q ) . . . . . . . . . . . . . 5,300 Shipping ($0.80 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 Utilities ($830) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 Other ($450 1 $0.05 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . 850 Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,580 Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,420 The actual results for August appear below: Quilcene Oysteria Income Statement For the Month Ended August 31 Actual pounds . . . . . . . . . . . . . . . . . . . . . . . 8,000 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,200 Expenses: Packing supplies . . . . . . . . . . . . . . . . . . . 4,200 Oyster bed maintenance . . . . . . . . . . . . . 3,100 Wages and salaries . . . . . . . . . . . . . . . . . 5,640 Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . 6,950 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 810 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980 Total expense . . . . . . . . . . . . . . . . . . . . . . . 21,680 Net operating income . . . . . . . . . . . . . . . . . $13,520

Required: Prepare a report showing the companys revenue and spending variances for August.

EXERCISE 94 Prepare a Flexible Budget Performance Report [LO94] Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the companys operations in July appear below:

Vulcan Flyovers Operating Data For the Month Ended July 31 Actual Results Flexible Budget Planning Budget Flights ( q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 48 50 Revenue ($320.00 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . $13,650 $15,360 $16,000 Expenses: Wages and salaries ($4,000 1 $82.00 q ) . . . . . . . . . 8,430 7,936 8,100 Fuel ($23.00 q ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260 1,104 1,150 Airport fees ($650 1 $38.00 q ) . . . . . . . . . . . . . . . . . 2,350 2,474 2,550 Aircraft depreciation ($7.00 q ) . . . . . . . . . . . . . . . . . . 336 336 350 Office expenses ($190 1 $2.00 q ) . . . . . . . . . . . . . . 460 286 290 Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,836 12,136 12,440 Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . $ 814 $ 3,224 $ 3,560

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. 2. Which of the variances should be of concern to management? Explain.

EXERCISE 95 Prepare a Flexible Budget with More Than One Cost Driver [LO95] Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost driversthe number of cruises and the number of passengersthat it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 80 passengers can be accommodated on the tour boat. Data concerning the companys cost formulas appear below:

xed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs . . . $5,200 $480.00 $2.00 Advertising . . . . . . . . . . . . . $1,700 Administrative costs . . . . . $4,300 $24.00 $1.00 Insurance . . . . . . . . . . . . . . $2,900

For example, vessel operating costs should be $5,200 per month plus $480 per cruise plus $2 per passenger. The companys sales should average $25 per passenger. The companys planning budget for July is based on 24 cruises and 1,400 passengers. Required: Prepare the companys planning budget for July.