Question
The performance of BlueStar Airlines for the most recent year, 2021, is shown in the following table: Actual Results @ Actual Prices Static Budget Variance
The performance of BlueStar Airlines for the most recent year, 2021, is shown in the following table:
Actual Results @ Actual Prices |
Static Budget |
Variance | |
Revenue | ? | $300,000,000 | ? |
Variable expenses | $200,000,000 | 195,000,000 | $5,000,000 U |
Contribution Margin | ? | 105,000,000 | ? |
Fixed expenses | 87,000,000 | 80,000,000 | $7,000,000 U |
Income | ? | $25,000,000 | ? |
Note: the $195,000,000 in budgeted variable expenses includes $90,000,000 for jet fuel.
The master budget had been based on a $0.20 revenue per passenger-kilometre. A passenger-kilometer is one paying passenger flown one kilometre. An average airfare decrease of 8% had helped generate an increase in passenger-kilometre flown that was 10% in excess of the master budget for the year.
The price per litre of jet fuel rose above the price used to formulate the master budget. The average jet fuel price increase for the year was 10%.
Required:
- Prepare a summary report using the five-column approach (actual results, flexible-budget variances, flexible budget, sales-volume variances, static or master budget) to help the president of the airline understand 2021 performance. Show your detailed calculations.
- Assume the jet fuel costs are purely variable and that the quantity of fuel used was at the same level of efficiency as predicted in the master budget. What part of the flexible-budget variance for variable costs is attributable to jet fuel expense? Explain.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started