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 Cost per per Month Course $ 2,970 Cost per Student $ 280 $ 60 Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses $1,220 $ 5,100 $ 2,000 $ 3,900 $ 42 4 For example, administrative expenses should be $3,900 per month plus $42 per course plus $4 per student. The company's sales should average $860 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: Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 53,000 $ 11,160 $ 18,050 $ 1,870 $ 5,100 $ 2,140 $ 3,754

Answer 1

Answer

• Requirement asked

	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Students	59			59			65
Revenues	$                 53,000.00	$            2,260.00	Favourable	$        50,740.00	$           5,160.00	Unfavourable	$        55,900.00
Expenses:
Instructer Wages	$                 11,160.00	$                720.00	Favourable	$        11,880.00	$                        -	None	$        11,880.00
Classroom supplies	$                 18,050.00	$            1,530.00	Unfavourable	$        16,520.00	$           1,680.00	Favourable	$        18,200.00
Utilities	$                   1,870.00	$                410.00	Unfavourable	$          1,460.00	$                        -	None	$          1,460.00
Campus Rent	$                   5,100.00	$                         -	None	$          5,100.00	$                        -	None	$          5,100.00
Insurance	$                   2,140.00	$                140.00	Unfavourable	$          2,000.00	$                        -	None	$          2,000.00
Administrative expenses	$                   3,754.00	$                550.00	Favourable	$          4,304.00	$                 24.00	Favourable	$          4,328.00
Total Expenses	$                 42,074.00	$                810.00	Unfavourable	$        41,264.00	$           1,704.00	Favourable	$        42,968.00
Net Operating Income	$                 10,926.00	$            1,450.00	Favourable	$          9,476.00	$           3,456.00	Unfavourable	$        12,932.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Courses	4	4	4
Students	59	59	65
Revenues	53000	=59*860	=65*860
Expenses:
Instructer Wages	11160	=4*2970	=4*2970
Classroom supplies	18050	=59*280	=65*280
Utilities	1870	=1220+(4*60)	=1220+(4*60)
Campus Rent	5100	5100	5100
Insurance	2140	2000	2000
Administrative expenses	3754	=3900+(4*42)+(59*4)	=3900+(4*42)+(65*4)