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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 Meals

Planning Budget

For 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:

 

Air Meals

Flexible Budget

For the Month Ended December 31

  Budgeted meals (q)                                                                     21,000 

  Revenue ($3.80q)                                                                          $79,800 

  Expenses:                         

      Raw materials ($2.30q)                                                           48,300 

      Wages and salaries ($6,400 + $0.25q)                               11,650 

      Utilities ($2,100 + $0.05q)                                                      3,150 

      Facility rent ($3,800)                                                                3,800 

      Insurance ($2,600)                                                                    2,600 

      Miscellaneous ($700 + $0.10q)                                            2,800 

                  Total expense                                                                72,300 

  Net operating income                                                                  $7,500 

Required:

Compute the company’s activity variances for December.

 

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