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 65 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			$	2,930
Classroom supplies					$	280
Utilities	$	1,220	$	80
Campus rent	$	5,000
Insurance	$	2,200
Administrative expenses	$	4,000	$	44	$	6

For example, administrative expenses should be $4,000 per month plus $44 per course plus $6 per student. The company’s sales should average $880 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

	Actual
Revenue	$	54,300
Instructor wages	$	11,000
Classroom supplies	$	18,050
Utilities	$	1,950
Campus rent	$	5,000
Insurance	$	2,340
Administrative expenses	$	3,992

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.)

Answer 1

Solution:

Gourmand Cooking School
Flexible Budget Performance Report
For the month ended September 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Student	59			59			65
Revenue	$54,300.00	$2,380.00	F	$51,920.00	$5,280.00	U	$57,200.00
Expenses:
Instructor Wages	$11,000.00	$720.00	F	$11,720.00	$0.00	None	$11,720.00
Classroom Supplies	$18,050.00	$1,530.00	U	$16,520.00	$1,680.00	F	$18,200.00
Utilities	$1,950.00	$410.00	U	$1,540.00	$0.00	None	$1,540.00
Campus Rent	$5,000.00	$0.00	None	$5,000.00	$0.00	None	$5,000.00
Insurance	$2,340.00	$140.00	U	$2,200.00	$0.00	None	$2,200.00
Administrative Expenses	$3,992.00	$538.00	F	$4,530.00	$36.00	F	$4,566.00
Total expense	$42,332.00	$822.00	U	$41,510.00	$1,716.00	F	$43,226.00
Net Operating Income	$11,968.00	$1,558.00	F	$10,410.00	$3,564.00	U	$13,974.00