Otomo Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: Fixed elementper monthVariable elementper guestVariable element per jeepRevenue$0 $134 $0 Tour guide wages$0 $0 $117 Vehicle expenses$4,700 $13 $65 Administrative expenses$2,200 $1 $0 ?In July, the company budgeted for 389 guests and 180 jeeps. The company's income statement showing the actual results for the month appears below:Otomo Jeep ToursIncome StatementFor the Month Ended July 31Actual guests 394Actual jeeps 175Revenue$53,986Expenses: Tour guide
wages 20,435Vehicle expenses 21,247Administrative expenses 2,544Total expense 44,226Net operating income$9,760?Required:?Prepare a report showing the company's activity variances for July. Label each variance as favorable (F) or unfavorable (U).
What will be an ideal response?
| Otomo Jeep Tours | |||||||
| Activity Variances | |||||||
| For the Month Ended July 31 | |||||||
| Flexible Budget | Activity Variances | Planning Budget | |||||
| Guests (q1) | 394 | 389 | |||||
| Jeeps (q2) | 175 | 180 | |||||
| Revenue ($134q1) | $ | 52,796 | $ | 670 | F | $ | 52,126 |
| Expenses: | |||||||
| Tour guide wages ($117q2) | 20,475 | 585 | F | 21,060 | |||
| Vehicle expenses ($4,700 + $13q1 + $65q2) | 21,197 | 260 | F | 21,457 | |||
| Administrative expenses ($2,200 + $1q1) | 2,594 | 5 | U | 2,589 | |||
| Total expense | 44,266 | 840 | F | 45,106 | |||
| Net operating income | $ | 8,530 | $ | 1,510 | F | $ | 7,020 |
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