Question

chapter 9 h 1

Exercise 9-12 Working with More Than One Cost Driver [LO9-1, LO9-2, LO9-3]

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 64 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			$	2,980
Classroom supplies					$	300
Utilities	$	1,200	$	70
Campus rent	$	5,100
Insurance	$	2,200
Administrative expenses	$	3,600	$	45	$	6

For example, administrative expenses should be $3,600 per month plus $45 per course plus $6 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September appear below:

	Actual
Revenue	$	52,780
Instructor wages	$	11,200
Classroom supplies	$	19,050
Utilities	$	1,890
Campus rent	$	5,100
Insurance	$	2,340
Administrative expenses	$	3,590

Answer 1

Solution:

Gourmand Cooking School
Flexible Budget Performance Report
For the month ended September 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Student	56			56			64
Revenue	$52,780.00	$4,060.00	F	$48,720.00	$6,960.00	U	$55,680.00
Expenses:
Instructor Wages	$11,200.00	$720.00	F	$11,920.00	$0.00	None	$11,920.00
Classroom Supplies	$19,050.00	$2,250.00	U	$16,800.00	$2,400.00	F	$19,200.00
Utilities	$1,890.00	$410.00	U	$1,480.00	$0.00	None	$1,480.00
Campus Rent	$5,100.00	$0.00	None	$5,100.00	$0.00	None	$5,100.00
Insurance	$2,340.00	$140.00	U	$2,200.00	$0.00	None	$2,200.00
Administrative Expenses	$3,590.00	$526.00	F	$4,116.00	$48.00	F	$4,164.00
Total expense	$43,170.00	$1,554.00	U	$41,616.00	$2,448.00	F	$44,064.00
Net Operating Income	$9,610.00	$2,506.00	F	$7,104.00	$4,512.00	U	$11,616.00