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# Prepare a summary performance report for Economy Airlines's President

See attached files.

Consider the performance (in thousands of dollars) of Economy Airlines for a given year in the table below.

The static (master) budget had been based on a budget of \$.20 per revenue passenger kilometer. An average passenger kilometer is one paying passenger who has flown one kilometer. An average airfare decrease of 8 percent helped to generate an increase in passenger kilometers flown that exceeded that static budget for the year by 10 percent.
The price per liter of jet fuel rose above the price used to formulate the static budget. The average price increase for the year was 12 percent.

Actual results at actual prices Static (master) Budget Variance
Revenue \$ ? \$300,000 \$?
Variable expenses 200,000 195,000 * 5,000 U
Contribution margin ? 105,000 ?
Fixed expenses 77,000 75,000 2,000 U
Operating income \$ ? \$30,000 \$ ?
* Includes the \$90,000 cost of fuel.

1. Prepare a summary performance report for the president that is similar to Exhibit 13-5
2. Assume that jet fuel costs are purely variable and the use of fuel was that the same level of efficiency as predicted in the static budget. What portion of the flexible- budget variance for variable expenses is attributable to jet fuel expenses? Explain.

#### Solution Summary

In an Excel format, the response compares the budget to actual results with variances.

\$2.19