alculate the company’s activity variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport. The company’s planning budget for July appears below:
| Flight Café | ||
| Planning Budget | ||
| For the Month Ended July 31 | ||
| Budgeted meals (q) | 24,000 | |
| Revenue ($4.20q) | $ | 100,800 |
| Expenses: | ||
| Raw materials ($2.20q) | 52,800 | |
| Wages and salaries ($6,200 + $0.20q) | 11,000 | |
| Utilities ($2,200 + $0.05q) | 3,400 | |
| Facility rent ($3,600) | 3,600 | |
| Insurance ($2,500) | 2,500 | |
| Miscellaneous ($400 + $0.10q) | 2,800 | |
| Total expense | 76,100 | |
| Net operating income | $ | 24,700 |
In July, 25,000 meals were actually served. The company’s flexible budget for this level of activity appears below:
| Flight Café | ||
| Flexible Budget | ||
| For the Month Ended July 31 | ||
| Budgeted meals (q) | 25,000 | |
| Revenue ($4.20q) | $ | 105,000 |
| Expenses: | ||
| Raw materials ($2.20q) | 55,000 | |
| Wages and salaries ($6,200+ $0.20q) | 11,200 | |
| Utilities ($2,200 + $0.05q) | 3,450 | |
| Facility rent ($3,600) | 3,600 | |
| Insurance ($2,500) | 2,500 | |
| Miscellaneous ($400 + $0.10q) | 2,900 | |
| Total expense | 78,650 | |
| Net operating income | $ | 26,350 |
Required:
1. Calculate the company’s activity variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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