Question

Problem 9-22 Critique a Report, Prepare a Performance Report [Lo9-1, LO9-2, L09-3, LO9-4, LO9-6) TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: Variance Report For the Month Ended July 31 Actual Planning 185 190 int 45,450 44 400 $1,050 12,180 12,025 155 Instructor wages 7,410 7,215 195 U 3,425 3,015 2,860 155 U 2,925 3,01 ncesAireraft depreciation Puel Maintenance Ground facility expenses Administration 2,775 85 F 4,295 95 4t405-110r - 33,25032,290 12,200 12,110 90F Total expense After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that 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: $240g $65q $39q $15q $640 $12q $1,900$6q $3,480 $5g Instructor vages Aircraft depreciation Fuel Maintenance Ground fácility expenses points Actual Flexible 190 Expenses: $ 12,180 2,775 3,015 3,010 4,405 33,250

Answer 1

Particulars	Cost formula	Actual	Revenue and spending variance		Flexible budget	Activity variance		Static budget
Lessons		190			190			185
Revenue	240q	45450	150	U	45600	1200	F	44400
Expenses
Instructor wages	65q	12180	170	F	12350	325	U	12025
Aircraft depreciation	39q	7410	0		7410	195	U	7215
Fuel	15q	3425	575	U	2850	75	U	2775
Maintenance	640+12q	3015	95	U	2920	60	U	2860
Ground facility expense	1900 + 6q	2925	115	F	3040	30	U	3010
Administration	3480 + 5q	4295	135	F	4430	25	U	4405
Total expense		33250	250	U	33000	710	U	32290
Net operating income		12200	400	U	12600	490	F	12110
Calculation of Flexible Budget	Lessons	190	Total Expenses as per flexible Budget
Revenue	240q	240*190	45600
Instructor wages	65q	65*190	12350
Aircraft Depreciation	39q	39*190	7410
Fuel	15q	15*190	2850
Maintenance	640+12q	12*190+640	2920
Ground Facility expense	1900+6q	6*190+1900	3040
Administration	3480+5q	5*190+3480	4430