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Exercise 9-2 (15 Minutes)

The activity variances report for the Flight Café shows unfavorable variances for revenue and favorable variances for expenses due to actual meals served being lower than planned. While profits declined by $330 due to lower than planned activity levels, management should not be overly concerned with the individual variances as they were all caused by the drop in the number of meals served.

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42 views1 page

Exercise 9-2 (15 Minutes)

The activity variances report for the Flight Café shows unfavorable variances for revenue and favorable variances for expenses due to actual meals served being lower than planned. While profits declined by $330 due to lower than planned activity levels, management should not be overly concerned with the individual variances as they were all caused by the drop in the number of meals served.

Uploaded by

Rana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Exercise 9-2 (15 minutes)

1. The activity variances are shown below:

Flight Café
Activity Variances
For the Month Ended July 31
Flexible Planning Activity
Budge
t Budget Variances
Meals .......................................... 17,800 18,000
Revenue ($4.50q) ........................ $80,100 $81,000 $ U
Expenses:
Raw materials ($2.40q) ............. 42,720 43,200 F
Wages and salaries ($5,200 +
$0.30q) .................................. 10,540 10,600 F
Utilities ($2,400 + $0.05q) ........ 3,290 3,300 F
Facility rent ($4,300) ................. 4,300 4,300
Insurance ($2,300) ................... 2,300 2,300
Miscellaneous ($680 + $0.10q) .. 2,460 2,480 F
..............................Totalexpense 65,610 66,180 F
Net operating income .................. $14,490 $14,820 $ U

2. Management should be concerned that the level of activity fell below


what had been planned for the month. This led to an expected decline
in profits of $330. However, the individual items on the report should
not receive much management attention. The unfavorable variance for
revenue and the favorable variances for expenses are entirely caused by
the drop in activity.

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