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 62 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			$	2,930
Classroom supplies					$	300
Utilities	$	1,210	$	55
Campus rent	$	4,900
Insurance	$	2,100
Administrative expenses	$	3,600	$	44	$	7

For example, administrative expenses should be $3,600 per month plus $44 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 60 students. The actual operating results for September appear below:

	Actual
Revenue	$	52,280
Instructor wages	$	11,000
Classroom supplies	$	18,450
Utilities	$	1,840
Campus rent	$	4,900
Insurance	$	2,240
Administrative expenses	$	3,636

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

Answer 1

		Actual	Revenue & spending		Flexible	Activity variance		planning
		Results	Variance		budget			budget
Courses		4			4			4
Students		60			60			62
Revenues		52,280	1,120	U	53400	1780	U	55180
Expenses
Instructor wages		11,000	720	F	11720	0	N	11720
Classroom supplies		18,450	450	U	18000	600	F	18600
Utilities		1,840	410	U	1430	0	N	1430
Campus rent		4,900	0	N	4,900	0	N	4,900
insurance		2,240	140	U	2,100	0	N	2,100
Administrative expenses		3,636	560	F	4196	14	F	4210
total expense		42,066	280	F	42346	614	F	42960
net operating income		10,214	840	U	11054	1166	U	12220