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 180 175 Variances Lessons $ 41,290 $ 40,250 $1,040 F Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income 10, 645 10,500 6,840 6,650 3,990 2,450 2,700 2,555 2,470 2,550 3,885 3,985 29,630 28,690 $ 11,660 $ 11,560 $ 145 U 190 U 640 U 145 U 80 F 100 F 940 U 100 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 q is the number of lessons sold: Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Cost Formulas $2309 $609 $389 $149 $630 + $119 $1,850 + $49 $3,460 + $39

Answer 1

	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Lessons	180			180			175
Revenue	41290	110	U	41400	1150	F	40250
Expenses:
Instructor wages	10645	155	F	10800	300	U	10500
Aircraft depreciation	6840	0	None	6840	190	U	6650
Fuel	3090	570	U	2520	70	U	2450
Maintenance	2700	90	U	2610	55	U	2555
Ground facility expenses	2470	100	F	2570	20	U	2550
Administration	3885	115	F	4000	15	U	3985
Total expense	29630	290	U	29340	650	U	28690
Net operating income	11660	400	U	12060	500	F	11560