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EXERCISE 9–4 Prepare a Flexible Budget Performance Report [LO4]
Mt. Hood Air offers scenic overflights of Mt. Hood and the Columbia River gorge. Data concern- ing the company’s operations in August appear below:
|
|
Planning Budget |
|
Flexible Budget |
|
Actual Results |
|
Flights (q) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
50 |
|
52 |
|
52 |
|
Revenue ($360.00q). . . . . . . . . . . . . . . . . . . . . . . |
$18,000 |
|
$18,720 |
|
$16,980 |
|
Expenses: Wages and salaries ($3,800 + $92.00q) . . . . . |
8,400 |
|
8,584 |
|
8,540 |
|
Fuel ($34.00q) . . . . . . . . . . . . . . . . . . . . . . . . . . |
1,700 |
|
1,768 |
|
1,930 |
|
Airport fees ($870 + $35.00q) . . . . . . . . . . . . . |
2,620 |
|
2,690 |
|
2,690 |
|
Aircraft depreciation ($11.00q) . . . . . . . . . . . . . . |
550 |
|
572 |
|
572 |
|
Office expenses ($230 + $1.00q) . . . . . . . . . . . |
280 |
|
282 |
|
450 |
|
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
13,550 |
|
13,896 |
|
14,182 |
|
Net operating income . . . . . . . . . . . . . . . . . . . . . . |
$ 4,450 |
|
$ 4,824 |
|
$ 2,798 |
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 August.
2. Which of the variances should be of concern to management? Explain.
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