Question

Problem 9-22 Critique a Report; Prepare a Performance Report [LO9-1, LO9-2, LO9-3, LO9-4, LO9-6] TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: TipTop Flight School Variance Report For the Month Ended July 31 Actual Results Planning Budget Variances Lessons 185 180 $42,360 $ 41,400 $ 960 F Revenue Expenses: Instructor wages 160 U 10,960 7,400 3,620 2,690 2,130 3,720 10,800 7,200 3,060 2,530 2,170 3,840 29,600 Aircraft depreciation 200 U Fuel 560 U Maintenance 160 U Ground facility expenses 40 F Administration 120 F Total expense 30,520 920 U 11,840 $ 11,800 $ Net operating income 40 F After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance. The planning budget was developed using the following formulas, where q is the number of lessons sold:

Answer 1

Answer

	Actual results	Revenue & Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Lessons	185			185			180
Revenues	$            42,360.00	$                 190.00	Unfavorable	$          42,550.00	$              1,150.00	Favourable	$              41,400.00
Expenses:
Instructer wages	$            10,960.00	$                 140.00	Favourable	$          11,100.00	$                  300.00	Unfavorable	$              10,800.00
Aircraft Depreciation	$              7,400.00	$                          -	None	$             7,400.00	$                  200.00	Unfavorable	$                 7,200.00
Fuel	$              3,620.00	$                 475.00	Unfavorable	$             3,145.00	$                    85.00	Unfavorable	$                 3,060.00
Maintenance	$              2,690.00	$                 105.00	Unfavorable	$             2,585.00	$                    55.00	Unfavorable	$                 2,530.00
Ground Facility Expenses	$              2,130.00	$                   60.00	Favourable	$             2,190.00	$                    20.00	Unfavorable	$                 2,170.00
Administration	$              3,720.00	$                 135.00	Favourable	$             3,855.00	$                    15.00	Unfavorable	$                 3,840.00
Total Expenses	$            30,520.00	$                 245.00	Unfavorable	$          30,275.00	$                  675.00	Unfavorable	$              29,600.00
Net Operating Income	$            11,840.00	$                 435.00	Unfavorable	$          12,275.00	$                  475.00	Favourable	$              11,800.00

--Working

	Actual results	Flexible Budget	Planning Budget
Lessons	185	185	180
Revenues	42360	=185*230	41400
Expenses:
Instructer wages	10960	=185*60	10800
Aircraft Depreciation	7400	=185*40	7200
Fuel	3620	=185*17	3060
Maintenance	2690	=550+(185*11)	2530
Ground Facility Expenses	2130	=1450+(185*4)	2170
Administration	3720	=3300+(185*3)	3840