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 63 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 $ 2,930 $300 $1,220 $ 75 $4,900 $2,100 $3,600 $ 43 $ 4 For example, administrative expenses should be $3,600 per month plus $43 per course plus $4 per student. The company's sales should average $850 per student. The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 57 students. The actual operating results for September appear below: Revenue Instructor wages classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 50,650 $ 11,000 $ 18,750 $ 1,930 $ 4,900 $ 2, 240 $ 3,450 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	63
Revenue	53550	=63*850
Expenses:
Instructor wages	11720	=4*2930
Classroom supplies	18900	=63*300
Utilities	1520	=1220+(4*75)
Campus rent	4900
Insurance	2100
Administrative expenses	4024	=3600+(4*43)+(63*4)
Total expense	43164
Net operating income	10386
2
	Flexible Budget
	For the month ended September 30
Budgeted Courses	4
Budgeted Students	57
Revenue	48450	=57*850
Expenses:
Instructor wages	11720	=4*2930
Classroom supplies	17100	=57*300
Utilities	1520	=1220+(4*75)
Campus rent	4900
Insurance	2100
Administrative expenses	4000	=3600+(4*43)+(57*4)
Total expense	41340
Net operating income	7110
3
	Actual results	Revenue and spending variance		Flexible budget
Courses	4			4
Students	57			57
Revenue	50650	2200	F	48450
Expenses:
Instructor wages	11000	720	F	11720
Classroom supplies	18750	1650	U	17100
Utilities	1930	410	U	1520
Campus rent	4900	0	None	4900
Insurance	2240	140	U	2100
Administrative expenses	3450	550	F	4000
Total expense	42270	930	U	41340
Net operating income	8380	1270	F	7110