Posted: August 4th, 2022

ACC EXERCISE 9–4 Mt. Hood Air

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 concerning
the company’s operations in August appear below:

Mt. Hood AirOperating Data

For the Month Ended August 31

Planning

BudgetFlexibleBudgetActual

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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