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 60 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 $ 2,940 Classroom supplies $ 310 Utilities $ 1,250 $ 80 Campus rent $ 4,900 Insurance $ 2,200 Administrative expenses $ 3,700 $ 41 $ 7 For example, administrative expenses should be $3,700 per month plus $41 per course plus $7 per student. The company’s sales should average $880 per student. The company planned to run four courses with a total of 60 students; however, it actually ran four courses with a total of only 50 students. The actual operating results for September appear below: Actual Revenue $ 49,900 Instructor wages $ 11,040 Classroom supplies $ 18,450 Utilities $ 1,980 Campus rent $ 4,900 Insurance $ 2,340 Administrative expenses $ 3,710 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.)

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	50			50			60
Revenue	$49,900.00	$5,900.00	F	$44,000.00	$8,800.00	U	$52,800.00
Expenses:
Instructor Wages	$11,040.00	$720.00	F	$11,760.00	$0.00	None	$11,760.00
Classroom Supplies	$18,450.00	$2,950.00	U	$15,500.00	$3,100.00	F	$18,600.00
Utilities	$1,980.00	$410.00	U	$1,570.00	$0.00	None	$1,570.00
Campus Rent	$4,900.00	$0.00	None	$4,900.00	$0.00	None	$4,900.00
Insurance	$2,340.00	$140.00	U	$2,200.00	$0.00	None	$2,200.00
Administrative Expenses	$3,710.00	$504.00	F	$4,214.00	$70.00	F	$4,284.00
Total expense	$42,420.00	$2,276.00	U	$40,144.00	$3,170.00	F	$43,314.00
Net Operating Income	$7,480.00	$3,624.00	F	$3,856.00	$5,630.00	U	$9,486.00