Vulcan Flyovers offers scenic overflights of Mount Saint Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below: Vulcan FlyoversOperating DataFor the Month Ended July 31 Actual ResultsFlexible BudgetPlanning BudgetFlights (q)535351Revenue ($340.00q)$ 16,100$ 18,020$ 17,340Expenses: Wages and salaries ($3,500 + $86.00q)8,0268,0587,886Fuel ($34.00q)1,9641,8021,734Airport fees ($830 + $33.00q)2,4792,5792,513Aircraft depreciation ($10.00q)530530510Office expenses ($220 + $1.00q)441273271Total expense13,44013,24212,914Net operating income$ 2,660$ 4,778$ 4,426 The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.Required:1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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.) **Vulcan Flyovers Flexible Budget Performance Report for the Month Ended July 31**| | Actual Results | Flexible Budget | Planning Budget ||--------------------------|----------------|-----------------|-----------------|| **Flights** | 53 | 53 | 51 || **Revenue** | $16,100 | $18,020 | $17,340 || **Expenses:** | | | || - Wages and salaries | $8,026 | $8,058 | $7,886 || - Fuel | $1,964 | $1,802 | $1,734 || - Airport fees | $2,479 | $2,579 | $2,513 || - Aircraft depreciation | $530 | $530 | $510 || - Office expenses | $441 | $273 | $271 || **Total expense** | $13,440 | $13,242 | $12,914 || **Net operating income** | $2,660 | $4,778 | $4,426 |**Explanation:**- **Flights:** The actual number of flights was 53, matching the flexible budget and exceeding the planning budget of 51.- **Revenue:** Actual revenue was $16,100, which is lower than both the flexible budget ($18,020) and the planning budget ($17,340).- **Expenses:** - **Wages and Salaries:** Actual expenses were slightly lower than the flexible budget but higher than the planning budget. - **Fuel:** The actual fuel cost exceeded the flexible budget but remained higher than the planning budget. - **Airport Fees:** Actual airport fees fell short of the flexible budget but were higher than the planning budget. - **Aircraft Depreciation and Office Expenses:** These categories closely followed both the flexible and planning budgets.- **Total Expense:** The actual total expenses ($13,440) were higher than both flexible ($13,242) and planning ($12,914) budgets.- **Net Operating Income:** The actual net operating income was significantly lower than both the flexible budget and the planning budget. This report highlights how actual performance compared to budgetary expectations, which is essential for financial planning and analysis.

Variance arises when the actual costs differ from the standard costs. The results are favorable…

Answered: Vulcan Flyovers offers scenic…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Vulcan Flyovers offers scenic overflights of Mount Saint Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

	Actual Results	Flexible Budget	Planning Budget
Vulcan Flyovers
Operating Data
For the Month Ended July 31
Flights (q)	53	53	51
Revenue ($340.00q)	$ 16,100	$ 18,020	$ 17,340
Expenses:
Wages and salaries ($3,500 + $86.00q)	8,026	8,058	7,886
Fuel ($34.00q)	1,964	1,802	1,734
Airport fees ($830 + $33.00q)	2,479	2,579	2,513
Aircraft depreciation ($10.00q)	530	530	510
Office expenses ($220 + $1.00q)	441	273	271
Total expense	13,440	13,242	12,914
Net operating income	$ 2,660	$ 4,778	$ 4,426

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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.)

**Vulcan Flyovers Flexible Budget Performance Report for the Month Ended July 31**

| | Actual Results | Flexible Budget | Planning Budget |
|--------------------------|----------------|-----------------|-----------------|
| **Flights** | 53 | 53 | 51 |
| **Revenue** | $16,100 | $18,020 | $17,340 |
| **Expenses:** | | | |
| - Wages and salaries | $8,026 | $8,058 | $7,886 |
| - Fuel | $1,964 | $1,802 | $1,734 |
| - Airport fees | $2,479 | $2,579 | $2,513 |
| - Aircraft depreciation | $530 | $530 | $510 |
| - Office expenses | $441 | $273 | $271 |
| **Total expense** | $13,440 | $13,242 | $12,914 |
| **Net operating income** | $2,660 | $4,778 | $4,426 |

**Explanation:**

- **Flights:** The actual number of flights was 53, matching the flexible budget and exceeding the planning budget of 51.
- **Revenue:** Actual revenue was $16,100, which is lower than both the flexible budget ($18,020) and the planning budget ($17,340).
- **Expenses:**
- **Wages and Salaries:** Actual expenses were slightly lower than the flexible budget but higher than the planning budget.
- **Fuel:** The actual fuel cost exceeded the flexible budget but remained higher than the planning budget.
- **Airport Fees:** Actual airport fees fell short of the flexible budget but were higher than the planning budget.
- **Aircraft Depreciation and Office Expenses:** These categories closely followed both the flexible and planning budgets.
- **Total Expense:** The actual total expenses ($13,440) were higher than both flexible ($13,242) and planning ($12,914) budgets.
- **Net Operating Income:** The actual net operating income was significantly lower than both the flexible budget and the planning budget.

This report highlights how actual performance compared to budgetary expectations, which is essential for financial planning and analysis.

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