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:

	Fixed Cost per Month		Cost per Course		Cost per Student
Instructor wages			$	2,940
Classroom supplies					$	290
Utilities	$	1,200	$	90
Campus rent	$	4,600
Insurance	$	2,000
Administrative expenses	$	3,600	$	44	$	3

For example, administrative expenses should be $3,600 per month plus $44 per course plus $3 per student. The company’s sales should average $880 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 55 students. The actual operating results for September appear below:

	Actual
Revenue	$	52,540
Instructor wages	$	11,040
Classroom supplies	$	18,120
Utilities	$	1,970
Campus rent	$	4,600
Insurance	$	2,140
Administrative expenses	$	3,391

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

Answer 1