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	$	1,210	$	65
Campus rent	$	4,700
Insurance	$	2,200
Administrative expenses	$	4,000	$	42	$	6

For example, administrative expenses should be $4,000 per month plus $42 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 61 students; however, it actually ran four courses with a total of only 57 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,170
Instructor wages	$	10,880
Classroom supplies	$	18,150
Utilities	$	1,880
Campus rent	$	4,700
Insurance	$	2,340
Administrative expenses	$	3,960

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 F/U Flexible Budget F/U    Planning Budget Courses 4 Students 57 Revenue $50,170 Expenses: Instructor wages 10,880 Classroom supplies 18,150 Utilities 1,880 Campus rent 4,700 Insurance 2,340 Administrative expenses 3,960 Total expense 41,910 Net operating income $8,260

Answer 1

Answer-

GOURMAND COOKING SCHOOL
FLEXIBLE BUDGET PERFORMANCE REPORT
For the month ended September
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	580	Favorable	-3480	Unfavorable
Less:-Expenses
Instructor wages	720	Favorable	0	None
Classroom supplies	-1050	Unfavorable	1200	Favorable
Utilities	-410	Unfavorable	0	None
Campus rent	0	None	0	None
Insurance	-140	Unfavorable	0	None
Administrative expenses	550	Favorable	24	Favorable
Total Expenses	-330	Unfavorable	1224	Favorable
Income from operations	250	Favorable	-2256	Unfavorable

Explanation-

GOURMAND COOKING SCHOOL
Revenue & Spending Variances
For the month ended September
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	57 students*$870 per student	49590	50170	580	Favorable
Less:-Expenses
Instructor wages	4 courses*$2900 per course	11600	10880	720	Favorable
Classroom supplies	57 students*$300 per student	17100	18150	-1050	Unfavorable
Utilities	(4 courses*$65 per course)+$1210	1470	1880	-410	Unfavorable
Campus rent		4700	4700	0	None
Insurance		2200	2340	-140	Unfavorable
Administrative expenses	(4 courses*$42 per course)+(57 students*$6 per student)+$4000	4510	3960	550	Favorable
Total Expenses		41580	41910	-330	Unfavorable
Income from operations		8010	8260	250	Favorable
GOURMAND COOKING SCHOOL
Activity Variance
For the month ended September
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	61 students*$870 per student= 53070	49590	-3480	Unfavorable
Less:-Expenses
Instructor wages	4 courses*$2900 per course= 11600	11600	0	None
Classroom supplies	61 students*$300 per student =18300	17100	1200	Favorable
Utilities	(4 courses*$65 per course)+$1210 =1470	1470	0	None
Campus rent	4700	4700	0	None
Insurance	2200	2200	0	None
Administrative expenses	(4 courses*$42 per course)+(61 students*$6 per student)+$4000 =4534	4510	24	Favorable
Total Expenses	42804	41580	1224	Favorable
Income from operations	10266	8010	-2256	Unfavorable