Question

Variance Report For the Month Ended July 31 Planning Actual Results Budget Variances 175 170 Lessons Revenue Expenses $ 34,960 34,000 960 F Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration 11,050 6,650 3,800 3,170 2,555 4,275 31,500 $ 3,460 170 U 190 U 400 U 130 U 65 F 85 F 740 U 3,240 220 F 10,880 6,460 3,400 3,040 2,620 4,360 Total expense Net operating income After several months of using such variance reports, the owner has become frustrated. For example, she is quite confide 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 Cost Formulas Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration $200q $64q $38q $20q $ 660 $14q $1,600 $6q $4,190 $1q

Answer 1

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Tip Top Flight School
Flexible Budget Report
For the month ended July 31
		Actual results	Revenue and Spending Variances		Flexible Budget	Activity Variance		Planning Budget
Lessons	q	175			175			170
Revenue	($200 * q)	$ 34,960	$      40	U	$ 35,000	$1,000	F	34000
Expenses:
Instructor wages	($64 * q)	$ 11,050	$    150	F	$ 11,200	$    320	U	$ 10,880
Aircraft depreciation	($38 * q)	$   6,650	$       0	None	$    6,650	$    190	U	$   6,460
Fuel	($20 * q)	$   3,800	$    300	U	$    3,500	$    100	U	$   3,400
Maintenance	$660 + ($14 * q)	$   3,170	$      60	U	$    3,110	$      70	U	$   3,040
Ground facility expenses	$1600 + ($6 * q)	$   2,555	$      95	F	$    2,650	$      30	U	$   2,620
Administration	$4190 + ($1 * q)	$   4,275	$      90	F	$    4,365	$         5	U	$   4,360
Total expense		$ 31,500	$      25	U	$ 31,475	$    715	U	$ 30,760
Net operating income		$   3,460	$      65	U	$    3,525	$    285	F	$   3,240