Ushak company which sells private airplanes and rents the helicopters for tours around Switzerland. Until 20x1, there was no accounting department at the company. Routine tasks, such as billing, were handled by someone with little formal accounting training. However, as the company grew, the owner recognized the need for more formal accounting procedures. Ann Heather has been hired as the company's new controller. Heather received the following performance evaluation during her first week on the job. "Ashik Aspan", the company's manager of aircraft operations, had prepared the report and planned to present it to the owner the next morning. "Take a look at these favorable variances for fuel and so on," Aspan said. "My operations team is doing an excellent job." Later that day, Ann took a closer look at the performance report.

Performance Report For the Month of September Formula Static Flexible Actual Budget Budget (32,000 (35,000 (per alr mile) alr miles) alr miles) Variance Passenger revenue ...mm $10.50 $336,000 $367.500 $31,500 U Less: Variable expenses: FUed ........... 1.50 $ 51.000 $ 52.500 $ 1,500 F Aircraft maintenance .......... 2.25 70,500 78,750 8,250 F Flight crew salaries....mm 1.20 39.300 42,000 2,700 F Seling and administrative 2.40 74,700 84.000 9,300 F Total variable expenses $ 7.35 $235,500 $257,250 $21,750 F Contribution margin $ 3.15 $100,500 $110,250 9,750 U Per Month Less: Fled expenses: Depreciation on alrcraft . $ 8,700 $ 8.700 $ 8,700 S O Landing fees ....... 2,700 3,000 2,700 300 U Supervisory salaries . ................. 27.000 25.800 27,000 1,200 F Selling and administrative 33.000 37.200 33,000 4,200 U Total fixed expanses $71.400 $ 74,700 $ 71.400 $ 3,300 U Operating Income ........ $ 25.800 $ 38.850 $13,050 U