ACCT640 – Chapter 10 – Homework

Air Meals 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 December appears below:

Air MealsPlanning BudgetFor the Month Ended December 31
	Budgeted meals (q)	20,000
	Revenue ($3.80q)	76,000
	Expenses:
	Raw materials ($2.30q)	46,000
	Wages and salaries ($6,400 + $0.25q)	11,400
	Utilities ($2,100 + $0.05q)	3,100
	Facility rent ($3,800)		3,800
	Insurance ($2,600)		2,600
	Miscellaneous ($700 + $0.10q)	2,700
	Total expense	69,600
	Net operating income	6,400

In December, 21,000 meals were actually served. The company’s flexible budget for this level of activity is as follows:

Budgeted meals (q)

Revenue ($3.80q)$

Expenses:

Raw materials ($2.30q)

Wages and salaries ($6,400 + $0.25q)

Utilities ($2,100 + $0.05q)

Facility rent ($3,800) 3,800 Insurance ($2,600) 2,600

Miscellaneous ($700 + $0.10q)

Total expense

Net operating income$

Air MealsFlexible BudgetFor the Month Ended December 31
21,000
79,800
48,300
11,650
3,150
2,800
72,300
7,500

Required:

Compute the company’s activity variances for December.

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