Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below: Vulcan Flyovers Operating Data For the Month Ended July 31 Actual Results Flexible Budget Planning Budget Flights (q) 52 52 50 Revenue ($350.00q) $ 16,300 $ 18,200 $ 17,500 Expenses: Wages and salaries ($3,400 + $89.00q) 7,990 8,028 7,850 Fuel ($31.00q) 1,780 1,612 1,550 Airport fees ($890 + $34.00q) 2,513 2,658 2,590 Aircraft depreciation ($9.00q) 468 468 450 Office expenses ($210 + $1.00q) 430 262 260 Total expense 13,181 13,028 12,700 Net operating income $ 3,119 $ 5,172 $ 4,800 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.)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:
| Vulcan Flyovers | ||||||
| Operating Data | ||||||
| For the Month Ended July 31 | ||||||
| Actual Results |
Flexible Budget |
Planning Budget |
||||
| Flights (q) | 52 | 52 | 50 | |||
| Revenue ($350.00q) | $ | 16,300 | $ | 18,200 | $ | 17,500 |
| Expenses: | ||||||
| Wages and salaries ($3,400 + $89.00q) | 7,990 | 8,028 | 7,850 | |||
| Fuel ($31.00q) | 1,780 | 1,612 | 1,550 | |||
| Airport fees ($890 + $34.00q) | 2,513 | 2,658 | 2,590 | |||
| Aircraft |
468 | 468 | 450 | |||
| Office expenses ($210 + $1.00q) | 430 | 262 | 260 | |||
| Total expense | 13,181 | 13,028 | 12,700 | |||
| Net operating income | $ | 3,119 | $ | 5,172 | $ | 4,800 |
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.)
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