Question

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		220			215
Revenue	$	59,130		$	58,050		$	1,080	F
Expenses:
Instructor wages		17,385			17,200			185	U
Aircraft depreciation		7,260			7,095			165	U
Fuel		4,550			3,870			680	U
Maintenance		4,080			3,895			185	U
Ground facility expenses		2,895			2,910			15	F
Administration		4,025			4,185			160	F
Total expense		40,195			39,155			1,040	U
Net operating income	$	18,935		$	18,895		$	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:

	Cost Formulas
Revenue	$270q
Instructor wages	$80q
Aircraft depreciation	$33q
Fuel	$18q
Maintenance	$670 + $15q
Ground facility expenses	$2,050 + $4q
Administration	$3,540 + $3q

  
Required:

2. Complete the flexible budget performance report for the school for July. (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 variances		Flexible budget	Activity variances		Planning budget
Lessons	220			220			215
Revenue	59130	270	U	59400	1350	F	58050
Expenses:
Instructor wages	17385	215	F	17600	400	U	17200
Aircraft depreciation	7260	0	None	7260	165	U	7095
Fuel	4550	590	U	3960	90	U	3870
Maintenance	4080	110	U	3970	75	U	3895
Ground facility expenses	2895	35	F	2930	20	U	2910
Administration	4025	175	F	4200	15	U	4185
Total expense	40195	275	U	39920	765	U	39155
Net operating income	18935	545	U	19480	585	F	18895