Question
Hottle Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost
Hottle Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:
Fixed element per month | Variable element per guest | Variable element per jeep | |||||||
Revenue | $ | 0 | $ | 95 | $ | 0 | |||
Tour guide wages | $ | 0 | $ | 0 | $ | 109 | |||
Vehicle expenses | $ | 5,000 | $ | 4 | $ | 56 | |||
Administrative expenses | $ | 2,000 | $ | 1 | $ | 0 | |||
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In February, the company budgeted for 370 guests and 140 jeeps. The company's income statement showing the actual results for the month appears below: |
Hottle Jeep Tours Income Statement For the Month Ended February 28 | ||
Actual guests | 362 | |
Actual jeeps | 142 | |
Revenue | $ | 34,330 |
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Expenses: | ||
Tour guide wages | 15,228 | |
Vehicle expenses | 14,520 | |
Administrative expenses | 2,362 | |
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Total expense | 32,110 | |
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Net operating income | $ | 2,220 |
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Required: |
Prepare a report showing the companys revenue and spending variances for February. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) |
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