Otomo Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:In July, the company budgeted for 352 guests and 122 jeeps. The company's income statement showing the actual results for the month appears below:Required:Prepare a report showing the company's activity variances for July. Label each variance as favorable (F) or unfavorable (U). (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.) ### Otomo Jeep Tours#### Activity Variances##### For the Month Ended July 31| | Flexible Budget | Planning Budget | Activity Variances ||---|-----------------|-----------------|--------------------|| **Guests** | 344 | 352 | || **Jeeps** | 124 | 122 | || **Revenue** | | | || **Expenses:** | | | || Tour guide wages | | | || Vehicle expenses | | | || Administrative expenses | | | || **Total expense** | | | || **Net operating income** | | | |### ExplanationThis table provides a summary of the activity variances for Otomo Jeep Tours for the month ended July 31. The table has three main sections: 1. **Guests and Jeeps**: This section lists the number of guests and jeeps for both the flexible budget and the planning budget. 2. **Revenue**: This row will include the total revenue accrued for the period, differentiating between the flexible and planning budgets.3. **Expenses**: This section breaks down the various expenditures incurred, which are categorized into tour guide wages, vehicle expenses, and administrative expenses. 4. **Total Expense**: This row sums up all the expenses from the previous section.5. **Net Operating Income**: This row calculates the net income after all expenses have been deducted from the total revenue. ### Key Points- **Flexible Budget vs. Planning Budget**: The flexible budget is an estimate that adjusts for changes in actual activity levels, in this case, the number of guests and jeeps. The planning budget, on the other hand, does not adjust for these changes.- **Activity Variances**: This column highlights the differences between the flexible budget and the planning budget, providing insight into variances in operational activities for the month. This table helps in understanding how Otomo Jeep Tours performed relative to its plans and forecasts for the month in question. ### Otomo Jeep Tours Budget and Income Statement AnalysisOtomo Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity, namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:#### Budget Data| | Fixed element per month | Variable element per guest | Variable element per jeep ||------------------------------------------|-------------------------|----------------------------|---------------------------|| **Revenue** | $0 | $82 | $0 || **Tour guide wages** | $0 | $0 | $102 || **Vehicle expenses** | $3,200 | $6 | $52 || **Administrative expenses** | $1,300 | $1 | $0 |In July, the company budgeted for 352 guests and 122 jeeps. The company's income statement showing the actual results for the month appears below:#### Income Statement for the Month Ended July 31| | Actual ||------------------------------------------|-------------------------|| **Actual guests** | 344 || **Actual jeeps** | 124 || **Revenue** | $28,148 || **Expenses:** || Tour guide wages | $12,398 || Vehicle expenses | $11,832 || Administrative expenses | $1,644 || **Total expense** | $25,874 || **Net operating income** | $2,274 |#### Required:Prepare a report showing the company's activity variances for July. Label each variance as favorable (F) or unfavorable (U). (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.)

The variance is the difference between the actual data and standard output.

Answered: Otomo Jeep Tours operates jeep tours in…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q