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 61 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			$	2,900
Classroom supplies					$	300
Utilities	$	1,240	$	55
Campus rent	$	4,900
Insurance	$	2,400
Administrative expenses	$	4,000	$	40	$	5

For example, administrative expenses should be $4,000 per month plus $40 per course plus $5 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 53 students. The actual operating results for September appear below:

	Actual
Revenue	$	52,000
Instructor wages	$	10,880
Classroom supplies	$	18,150
Utilities	$	1,870
Campus rent	$	4,900
Insurance	$	2,540
Administrative expenses	$	3,891

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Gourmand Cooking School Flexible Budget Performance Report For the Month Ended September 30 Actual Results u f none Flexible Budget u f none Planning Budget Courses 4 Students 53 Revenue $52,000 Expenses: Instructor wages 10,880 Classroom supplies 18,150 Utilities 1,870 Campus rent 4,900 Insurance 2,540 Administrative expenses 3,891 Total expense 42,231 Net operating income $9,769

Answer 1

Particulars	Cost formula	Actual	Revenue and spending variance		Flexible budget	Activity variance		Planning budget
Courses		4			4			4
Student		53			53			61
Revenue	900	52000	6420	F	45580	2100	U	52460
Expenses
Instructor wages	2900 A	10880	720	F	11600	0		11600
Classroom supplies	300 B	18150	2250	U	15900	2400	F	18300
utilities	1240 + 55A	1870	410	U	1460	0		1460
Campus rent	4900	4900	0		4900	0		4900
Insurance	2400	2540	140	U	2400	0		2400
Administrative expense	4000+40A+5B	3891	534	F	4425	40	F	4465
Total expense		42231	1546	U	40685	2440	F	43125
Net operating income		9769	4874	F	4895	4440	U	9335