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 Planning Results Budget Variances 220 215 Lessons $ 56,890 $ 55,900 $ 990 F Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income 16,315 16,125 190 U 7,260 7,095 165 U 4,030 3, 440 590 U 3,780 3,590 190 U 2,190 2,245 55 F 3,675 3,790 115 F 37,250 36,285 965 U $ 19,640 $ 19,615 $ 25 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 is the number of lessons sold: Cost Formulas $260g $75g Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration $339 $169 $580 + $149 $1,600 + $39 $3,360 + $29

Answer 1

220 solution : TipTop Flight School Flexible Budget Performance Report For the month sending July 31 Actual Revenuel Flexible Activity Planning Results spending Budget variances Budget Veriences Lessons 220 215 Revenue . $56.590 $310 u $57,200 $1,300 F: $55.900 Expenses: Instructor $16,315 $185 F .. $16.500 $375 i $16,125 - wages Airexarz $1,260 $0 N $1,260 ..$165.1 $7,095 Depreciation Fuel $ 4,030 $510 $3,520 $80 a $3,440 Maintenance $3,780 $120 u $3,660 $10 u $3,590 Ground Escp 32,190 870 F $2,260 $ 150 $2,245 Administration $3,675 $125 F. $3,800, $3,750 Total Expense $37,250 $250 $31.000 $36,285 Net operating Income $19.640 $560 320200 $585 تاكو و

Escplanation: i flessible Budget " * Revenue - $260 per lesson x 220 lessons = $57,200 s Instructor wages -$75 perlesson 4 220 lessons at the $16,500 . ESTET * Alveraft Depreciation 2 n =$33 perlesson 4220 lessons :$ 7,200 s Fuel - $ 16 per lesson x 220 lessons = $ 3,520 s Maintenance = $580 +($lu per lesson xzzo lessons) · =$580 + $3,080 => $3,600 a. Ground Facility 16oot ($3 per lesson x 220 lessons) expenses = $1,600 + $660 => $2,260 • Administration 283,3607 (8.2 per lesson 7225. lessons) ... . $3,360 + $ U10 » $ 3800 • Total Expenses $16.500+$7,268 +93520+ $3:660+52260 +$3,800 $371800. Net operating Income =$572oo-$371000 = $20,000

2) Revenue/spending variance = Actual - Flexible Budget Revenue Ispending variance Actual results. – Flexible Budget = Revenue ! spending verriance Lessons 220. 220 Revenue $56,890 - $57.20o = $310 u Expenses' 'Instructor wages $16,315 - $ 16,500 $185 F AIYLYart Depreciation $ 71260 $ 1.260 .= $0 . Enel $41030 :- $ 3,520 : =$510 u Maintenance $31180 $ 3,660 = $120 u Ground Facility sliky $2,190 - $2,260 =$90 F : : expense *2" Administration $3675 - $3,800 ::-$.125 Total Esl pensé 537,250 $3.71000 = $250 Net operating $19,660 $ 201200 = $560 U.. Income = .can.c 2 LL U

3) Activity variance = Flexible Budget - Planning Budget Activity Variance i. Flessible Budget Planning .. Budget . Activity. Variance . $1300 F Lessons 220 $57,200 . - 215 $55,900 = Revenue Expenses! Instrustor wages Aircraft Depreciation Fuel Maintenance : Ground Facility Eolpense Administration Total Esspense . . Net operating Income . $16.500 - $ 77260 - $ 3,520 - $ 3,660 - $2, 260 - $16,125 $7,095 $ 3,440 $ 31590 $2izus = $315 = $165 = . $80 .= $ TO = $15 cccc $31790 . $3,800 - $35.000 .- $201200 - C. $19,615 =
Hi. If you have any doubts relating to the above solution feel free to rise your doubts through comments. Thank You.