Question

rk, Ch 9 6 Hel The its two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company's cost formulas appear below nt has identified two cost drivers it uses in Fi Instructor wages Classroon supplies Utilities Campus rent Insurance s 2,960 260 s 1,210 60 5,000 2,280 $3,600 45 S 4 For example, administrative expenses should be $3.600 per month plus S45 per course plus $4 per student The company's sales should average $900 per student The company planned to run four courses with a total of 61 students: however it actually ran four courses with a total of only 57 students. The actual operating results for September appear below Actual s 52,e00 11,120 s 15,710 S 1,860 s 5,000 $2,340 Classroom supplies Campus rent Insurance Prey 8 of 9 il Ne

Answer 1

Solution:

First of all we need to calculate the Planned Budget. Planned budget is the master budget prepared by estimated activity at the beginning using standard cost.

Gourmand Cooking School
Planning Budget
For the Month Ended September 30
Planned Courses	4
Number of Students	61
Revenue (61 Students x $900)	$54,900
Expenses:
Instructor wages (4 Courses x $2,960)	$11,840
Classroom supplies (61*260)	$15,860
Utilities ($1210 + (4*61))	$1,454
Campus rent	$5,000
Insurance	$2,200
Administrative expenses (3600 + (4*45) + (61*4)	$4,024
Total expense	$40,378
Net Operating Income	$14,522

Flexible Budget is a budget prepared using the actual activity run or performed by the company at standard cost. Hence we will take actual activity performed by the company and standard cost.

Now we need to calculate the Flexible Budget using the actual student ran 60 student and 4 courses

Gourmand Cooking School
Flexible Budget
For the Month Ended September 30
Actual Courses Run	4
Number of Students Actual	57
Revenue (57 Students x $900)	$51,300
Expenses:
Instructor wages (4 Courses x $2,960)	$11,840
Classroom supplies (57*260)	$14,820
Utilities ($1210 + (4*57))	$1,438
Campus rent	$5,000
Insurance	$2,200
Administrative expenses (3600 + (4*45) + (57*4)	$4,008
Total expense	$39,306
Net Operating Income	$11,994

Flexible Budget Report

Gourmand Cooking School
Flexible Budget Performance Report
For the Month Ended September 30
	Actual Result	Revenue and Spending Variance		Flexible Budget (As per above calculation)	Activity Variance		Planning Budget (As calculated above)
Courses	4			4			4
Students	57			57			61
Revenue	$52,000	$700	F	$51,300	$3,600	U	$54,900
Expenses:
Instructor wages	$11,120	$720	F	$11,840	$0	none	$11,840
Classroom supplies	$15,710	$890	U	$14,820	$1,040	F	$15,860
Utilities	$1,860	$422	U	$1,438	$16	F	$1,454
Campus rent	$5,000	$0	None	$5,000	$0	None	$5,000
Insurance	$2,340	$140	U	$2,200	$0	None	$2,200
Administrative expenses	$3,450	$558	F	$4,008	$16	F	$4,024
Total expense	$39,480	$174	U	$39,306	$1,072	F	$40,378
Net Operating Income	$12,520	$526	F	$11,994	$2,528	U	$14,522

Note --- Revenue and spending variance is the difference of Actual Result and Flexible Budget.

Activity Variance is the difference of Flexible Budget and Planned Budget.