Question

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company's cost formulas appear below: Instructor wages classroom supplies Utilities Campus rent Insurance Administrative expenses Fixed Cost per Cost per cost per Month Course Student $ 2,920 $ 270 $1,240 $ 70 $4,600 $2,300 $3,800 $ 42 $ 3 For example, administrative expenses should be $3,800 per month plus $42 per course plus $3 per student. The company's sales should average $860 per student. The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 51 students. The actual operating results for September appear below: Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 49,560 $ 10,960 $ 16,320 $ 1,930 $ 4,600 $ 2,440 $ 3,577 Required: Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Answer

	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Students	51			51			61
Revenues	$                 49,560.00	$            5,700.00	Favourable	$        43,860.00	$           9,820.00	Unfavourable	$        53,680.00
Expenses:
Instructer Wages	$                 10,960.00	$                720.00	Favourable	$        11,680.00	$                        -	None	$        11,680.00
Classroom supplies	$                 16,320.00	$            2,550.00	Unfavourable	$        13,770.00	$           2,700.00	Favourable	$        16,470.00
Utilities	$                   1,930.00	$                410.00	Unfavourable	$          1,520.00	$                        -	None	$          1,520.00
Campus Rent	$                   4,600.00	$                         -	None	$          4,600.00	$                        -	None	$          4,600.00
Insurance	$                   2,440.00	$                140.00	Unfavourable	$          2,300.00	$                        -	None	$          2,300.00
Administrative expenses	$                   3,577.00	$                544.00	Favourable	$          4,121.00	$                 30.00	Favourable	$          4,151.00
Total Expenses	$                 39,827.00	$            1,836.00	Unfavourable	$        37,991.00	$           2,730.00	Favourable	$        40,721.00
Net Operating Income	$                   9,733.00	$            3,864.00	Favourable	$          5,869.00	$           7,090.00	Unfavourable	$        12,959.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Courses	4	4	4
Students	51	51	61
Revenues	49560	=51*860	=61*880
Expenses:
Instructer Wages	10960	=4*2920	=4*2920
Classroom supplies	16320	=51*270	=61*270
Utilities	1930	=1240+(4*70)	=1240+(4*70)
Campus Rent	4600	4600	4600
Insurance	2440	2300	2300
Administrative expenses	3577	=3800+(4*42)+(51*3)	=3800+(4*42)+(61*3)