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 concerningthe company’s operations in August appear below:
Mt. Hood Air
Operating Data
For the Month Ended August 31
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 foroverflights 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.