Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the localairport. The company’s planning budget for July follows:bre27076_ch08_358-395.indd 378 7/23/09 4:11:10 PMConfi rming Pages379Flight CaféPlanning BudgetFor the Month Ended July 31Budgeted meals (q) ................................................ 18,000Revenue ($4.50q) ................................................... $81,000Expenses:Raw materials ($2.40q) ....................................... 43,200Wages and salaries ($5,200 $0.30q) .............. 10,600Utilities ($2,400 $0.05q) .................................. 3,300Facility rent ($4,300) ............................................ 4,300Insurance ($2,300) .............................................. 2,300Miscellaneous ($680 $0.10q) .......................... 2,480Total expense ......................................................... 66,180Net operating income .............................................. $14,820In July, 17,800 meals were actually served. The company’s flexible budget for this level of activity appears below:Flight CaféFlexible BudgetFor the Month Ended July 31Budgeted meals (q) .................................................... 17,800Revenue ($4.50q) ....................................................... $80,100Expenses:Raw materials ($2.40q) ........................................... 42,720Wages and salaries ($5,200 $0.30q) .................. 10,540Utilities ($2,400 $0.05q) ...................................... 3,290Facility rent ($4,300) ............................................... 4,300Insurance ($2,300) .................................................. 2,300Miscellaneous ($680 $0.10q) .............................. 2,460Total expense ............................................................. 65,610Net operating income ................................................. $14,490Required:1. Prepare a report showing the company’s activity variances for July.2. Which of the activity variances should be of concern to management? Explain.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the local
airport. The company’s planning budget for July follows:
bre27076_ch08_358-395.indd 378 7/23/09 4:11:10 PM
Confi rming Pages
379
Flight Café
Planning Budget
For the Month Ended July 31
Budgeted meals (q) ................................................ 18,000
Revenue ($4.50q) ................................................... $81,000
Expenses:
Raw materials ($2.40q) ....................................... 43,200
Wages and salaries ($5,200 $0.30q) .............. 10,600
Utilities ($2,400 $0.05q) .................................. 3,300
Facility rent ($4,300) ............................................ 4,300
Insurance ($2,300) .............................................. 2,300
Miscellaneous ($680 $0.10q) .......................... 2,480
Total expense ......................................................... 66,180
Net operating income .............................................. $14,820
In July, 17,800 meals were actually served. The company’s flexible budget for this level of activity appears below:
Flight Café
Flexible Budget
For the Month Ended July 31
Budgeted meals (q) .................................................... 17,800
Revenue ($4.50q) ....................................................... $80,100
Expenses:
Raw materials ($2.40q) ........................................... 42,720
Wages and salaries ($5,200 $0.30q) .................. 10,540
Utilities ($2,400 $0.05q) ...................................... 3,290
Facility rent ($4,300) ............................................... 4,300
Insurance ($2,300) .................................................. 2,300
Miscellaneous ($680 $0.10q) .............................. 2,460
Total expense ............................................................. 65,610
Net operating income ................................................. $14,490
Required:
1. Prepare a report showing the company’s activity variances for July.
2. Which of the activity variances should be of concern to management? Explain.
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