Flight Cafe 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 July follows:

.

Flight Cafe

Planning Budget For the Month Ended July 31

Budgeted meals (q) ............... 18000

Revenue ($4.50q) ... ..................$81000

Expenses:

Raw malerials ($2.40q) .............43200

Wages and salaries ($5,200 + $0.30q) .. 10600

Utilities ($2,400 + $0.05q) ...3300

Facility rent ($4,300)..........4300

Insurance ($2,300) ...... ...............2300

Miscellaneous ($680 + $0.t Oq) ....2480

.total expense.........66180

net operating income......$14820

In July, 17,800 meals were actually served. The company's flexible budget for this level ofactivity appears below:

Flight Care

Flexible Budget For the Month Ended July 31

Budgeted meals (q) ..................17800

Revenue ($4.50q)..... .. . . . . . . . . . .80100

Expenses:

raw materials($2.40q).......42720

Wages and salaries ($5,200 + $0.30q).10540

Utilities ($2,400 + $0.05q)................3290

Facility rent ($4,300) ................ ....4300

Insurance ($2,300).....................2300

Miscellaneous ($680 + $0.10q)..2460

Total expense ................ ..........65610

Net operating income .... ............14490

Required

I. Prepare a report showing the company's activity variances for July.

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