III. Flexible Budgeting

At Disney World in Orlando, Florida there is an outdoor camping facility called Fort Wilderness. The Fort sits on a 10,000 wooded-acre site. Disney offers scenic tours around Fort Wilderness using Disney characters. Data for the Fort Wilderness operation appear below:

Disney World Amusement Park, Inc.

Fort Wilderness Outdoor Facility

For the month ended August 31

Actual Flexible Planning

Results Budget Budget

Scenic Tours (q).50..5545

Revenue ($100q)....$15,000.$16,200....$14,500

Expenses:

Wages & Salaries ($2,000+$50q).$7,000$7,800..$6,000

Gasoline & Oil ($20q).2,000..2,200...1,800

Theme Park Tickets ($300+$15q)..1,800..2,4001,200

Guest Bus Depreciation ($10)1,000..1,400...800

Administrative Expenses ($200+$4q)....400.400..300

Total Expenses.$12,200..$14,200...$10,100

Net Operating Income...$2,800$2,000......$4,400

The company measures its activity in terms of scenic tours. Tickets for the scenic tours can be purchased individually, or at a group discount for groups, clubs, etc.

Required:

1. Utilizing the format covered in Ch.9, prepare a flexible budget report for August that includes revenue and spending variances and activity variances.

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

(note: do not spend time re-configuring the flexible budget for q. Just prepare the columns for the variances.)