Question 1 Flaming Foliage Sky Tours'

Flexible Budget Report

air-km air-km air-km32000 35000 38000

RMPassenger revenue 336000 367500 399000Less : Variable expenses Fuel 48000 52500 57000 Aircraft maintenance 72000 78750 85500 Flight Crew Salaries 38400 42000 45600 Selling & Administration 76800 84000 91200Total variable expenses 235200 257250 279300Contribution margin 100800 110250 119700

Less : Fixed expenses : Depreciation on aircraft 8700 8700 8700 Landing fees 2700 2700 2700 Supervisory salaries 27000 27000 27000 Selling & Administrative 33000 33000 33000Total fixed expenses 71400 71400 71400Net profit 29400 38850 48300

Question 2Although variable expenses show favourable variance, the fixed expenses is vice-versa. Plus, the travelling air-km is not as predicted. Thus, passenger revenue also affected.

Question 3The report is misleading in spite of favourable variance as shown. This due to differences between static budget and actual in air-km travel. Comparison should be done with the same air-km travel. This will ensure that comparison is done accurately.

Question 4Flaming Foliage Sky Tours'

Flexible Budget ReportActual Budget Varianceair-km air-km -

32000 32000RM RM RM

Passenger revenue 336000 336000 0Less : Variable expenses Fuel 51000 48000 3000 Aircraft maintainence 70500 72000 -1500 Flight Crew Salaries 39300 38400 900 Selling & Administration 74700 76800 -2100Total variable expenses 235500 235200 300Contribution margin 100500 100800 -300

Less : Fixed expenses : Depreciation on aircraft 8700 8700 0 Landing fees 3000 2700 300 Supervisory salaries 25800 27000 -1200 Selling & Administrative 37200 33000 4200Total fixed expenses 74700 71400 3300Net profit 25800 29400 -3600

Question 5Miss Frost has obligation to disclose all weaknesses in the original performance report to the owner. Therefore, she should present the revised expense report that she produces.