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 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month		Cost per Course		Cost per Student
Instructor wages			$	2,970
Classroom supplies					$	270
Utilities	$	1,240	$	70
Campus rent	$	4,800
Insurance	$	2,000
Administrative expenses	$	3,900	$	40	$	5

For example, administrative expenses should be $3,900 per month plus $40 per course plus $5 per student. The company’s sales should average $860 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,420
Instructor wages	$	11,160
Classroom supplies	$	16,590
Utilities	$	1,930
Campus rent	$	4,800
Insurance	$	2,140
Administrative expenses	$	3,796

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.)

	Gourmand Cooking School Flexible Budget Performance Report For the Month Ended September 30 Actual Results Flexible Budget Planning Budget Courses 4 Students 54 Revenue $50,420 Expenses: Instructor wages 11,160 Classroom supplies 16,590 Utilities 1,930 Campus rent 4,800    Insurance 2,140 Administrative expenses 3,796 Total expense 40,416 Net operating income $10,004

Answer 1

solution: Revenue and spending variance for the month ended september 30 | Actual result flexible budget* Revenue and spending variance bra-c Activity variance Planning budget* d=c-e Courses students 54 54 63 50420 3980 F 46440 6880 U 53320 Revenue Expenses : Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses total expenses net operating income 11160 16590 1930 4800 2140 3796 40416 10004 720 F 2010 U 410U 0 None 140 U 534 F 1306 U 2674 F 11880 14580 1520 4800 2000 4330 39110 7330 0 None 2160 F 0 None 0 None 0 None 11880 16740 1520 4800 2000 4370 41310 12010 40 F 2200 F 4680 U

*working: 1.planning budget for the month ended september 30 fixed cost cost per course cost per student Planning budget d=a+4*b+62*c Budgeted courses Budgeted students 62 860 53,320 2,970 270 70 Revenue Expenses : Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses total expenses net operating income 1,240 4,800 2,000 3,900 11,880 16,740 1,520 4,800 2,000 4,370 41,310 12,010 2.flexible budget for the month ended september 30 fixed cost cost per course cost per student Flexible budget d=a+4*b+54*c Actual courses Actual students 54 860 46,440 2,970 270 70 Revenue Expenses : Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses total expenses net operating income 1,240 4,800 2,000 3,900 11,880 14,580 1,520 4,800 2,000 4,330 39,110 7,330 40 5