Flaming Foliage Sky Tours is a small sightseeing tour company in Plettenberg that specialises in aerial tours of the Garden Route area. Until recently, the company had not had an accounting department. Routine bookkeeping tasks, such as billing, had been handled by a person who had little formal training in accounting. As the business began to grow, however, the owner recognized the need for more formal accounting procedures. Jacqueline Vermaak was recently hired as the new accountant, and she has the authority to hire an assistant. During her first week on the job, Vermaak was given the performance report below. The report was prepared by Red Leif, the company's manager of Aircraft Operations, who was planning to present it to the owner the next morning.

Required
1. Prepare a flexible budget report for Flaming Foliage Sky Tours' expenses, based on the following activity levels:
a. 32,000 air-kilometres
b. 35,000 air-kilometres
2. In spite of several favourable expense variances shown in the report above, the company's September net profit was only about two-thirds of the expected level. Why?
3. Write a brief memo to the manager of Aircraft Operations explaining why the original variance report is misleading.
4. Prepare a revised expense variance report for September, based on the flexible budget prepared in Requirement 1.
5. Jacqueline Vermaak presented the revised expense report to Red Leif, along with the memo explaining why the original performance report was misleading. Leif did not take it well. He complained of Vermaak's 'interference', and pointed out that the company had been doing just fine without her. 'I'm taking my report to the owner tomorrow,' Leif insisted. 'Yours just makes us look bad.' What are Vermaak's ethical obligations in this matter? What should she do?