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 companys 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: 

1. Prepare a report showing the company's activity variances for December. 
2. Which of the activity variances should be of concern to management? Explain.