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. Fixed Cost per Month Cost per cost per Course Student $ 2,918 $270 $ 55 Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses $ $ $ $ 1,210 4.500 2,380 3,900 $ 46 $ 3 Fences For example, administrative expenses should be $3.900 per month plus $46 per course plus $3 per student. The company's sales should average $890 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 59 students. The actual operating results for September appear below Revenue Instructor wages Classroon supplies Utilities Campus rent Insurance Administrative expenses Actual $51,390 $10,920 $16,320 $ 1,840 $ 4,500 $ 2,440 $3,693 Required: 1. Prepare the company's planning budget for September 2. Prepare the company's flexible budget for September 3. Calculate the revenue and spending variances for September

Answer 1

1
	Planning Budget
	For the month ended September 30
Budgeted courses	4
Budgeted students	61
Revenue	54290	=61*890
Expenses:
Instructor wages	11640	=4*2910
Classroom supplies	16470	=61*270
Utilities	1430	=1210+(4*55)
Campus rent	4500
Insurance	2300
Administrative expenses	4267	=3900+(4*46)+(61*3)
Total expense	40607
Net operating income	13683
2
	Flexible Budget
	For the month ended September 30
Actual courses	4
Actual students	59
Revenue	52510	=59*890
Expenses:
Instructor wages	11640	=4*2910
Classroom supplies	15930	=59*270
Utilities	1430	=1210+(4*55)
Campus rent	4500
Insurance	2300
Administrative expenses	4261	=3900+(4*46)+(59*3)
Total expense	40061
Net operating income	12449
3
	Actual results	Revenue and spending variance		Flexible budget
Courses	4			4
Students	59			59
Revenue	51390	1120	U	52510
Expenses:
Instructor wages	10920	720	F	11640
Classroom supplies	16320	390	U	15930
Utilities	1840	410	U	1430
Campus rent	4500	0	None	4500
Insurance	2440	140	U	2300
Administrative expenses	3693	568	F	4261
Total expense	39713	348	F	40061
Net operating income	11677	772	U	12449