Practice Calculations Formula/Unit Various Levels

The passenger miles would be (1,500,000 * 1.1) = 1,650,000. The revenue per passenger mile would be $0.20 — (.08*.2) = $0.184

So the actual revenue was (.184)*(1,650,000) = $303,600.

Now we can calculate Flex for Actual Level, the third column. This is based on the flex budget figures, which were $0.20 in revenue per passenger mile. Variable expenses were 195,000 / 1,500, 000 = $0.13 per passenger mile in the flex budget. Fixed costs were $80,000 and that should not change.

The results Flex for Actual Level shows that the actual performance was lower than what would have been expected given the actual sales levels recorded and the figures listed in the static budget. This is to be expected, because the actual revenue per passenger mile was decreased in order to achieve those higher passenger mile figures.

The columns 2 and 4 can now be filled in, according to the formulas presented on page 310. Column 2 = Column 1 — Column 3; and Column 4 = Column 3 — Column 5.

The total chart is as follows:

Flex for Sales-Act

Static

Actual

Variances

Actual level

Variance

Budget

Passenger Miles

1650000

0

1650000

150000

1500000

Revenue

303600

-26400

330000

30000

300,000

Variable Exp

200,000

-14500

214500

19500

195,000

Contribution

103,600

-11900

115,500

10500

105,000

Fixed Exp

87,000

80,000

0

80,000

Income

16,600

-18900

35,500

10500

25,000

Note that here the jet fuel cost isnt something to worry about, because it is included in the actual cost figures already provided.

b) in this case, we are taking the data above and determining how much of the variance was related to the increase in fuel.

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