FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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) 27,000
Revenue ($4.00q) $ 108,000
Expenses:  
Raw materials ($2.00q) 54,000
Wages and salaries ($6,200 + $0.20q) 11,600
Utilities ($2,100 + $0.05q) 3,450
Facility rent ($3,500) 3,500
Insurance ($2,000) 2,000
Miscellaneous ($700 + $0.10q) 3,400
Total expense 77,950
Net operating income $ 30,050

 

In July, 28,000 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) 28,000
Revenue ($4.00q) $ 112,000
Expenses:  
Raw materials ($2.00q) 56,000
Wages and salaries ($6,200+ $0.20q) 11,800
Utilities ($2,100 + $0.05q) 3,500
Facility rent ($3,500) 3,500
Insurance ($2,000) 2,000
Miscellaneous ($700 + $0.10q) 3,500
Total expense 80,300
Net operating income $ 31,700

 

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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