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 $ 2,950 $ 300 $1,230 $ 75 $4,900 $2,400 $3,500 $ 41 $ 6 For example, administrative expenses should be $3,500 per month plus $41 per course plus $6 per student. The company's sales should average $880 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 55 students. The actual operating results for September appear below: Revenue Instructor wages classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 50, 780 $ 11,080 $ 18,150 $ 1,940 $ 4,900 $ 2,540 $ 3,456 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

	Actual results	Revenue and spending variance		Flexible budget	Activity variances		Planning Budget
Courses	4			4			4
Students	55			55			61
Revenue	50780	2380	F	48400	5280	U	53680
Expenses:
Instructor wages	11080	720	F	11800	0	None	11800
Classroom supplies	18150	1650	U	16500	1800	F	18300
Utilities	1940	410	U	1530	0	None	1530
Campus rent	4900	0	None	4900	0	None	4900
Insurance	2540	140	U	2400	0	None	2400
Administrative expenses	3456	538	F	3994	36	F	4030
Total expense	42066	942	U	41124	1836	F	42960
Net operating income	8714	1438	F	7276	3444	U	10720