Question

Required:

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

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 $ 2,960 Classroom supplies $ 290 Utilities $ 1,200 $ 80 Campus rent $ 4,900 Insurance $ 2,100 Administrative expenses $ 3,600 $ 45 $ 6 For example, administrative expenses should be $3,600 per month plus $45 per course plus $6 per student. The company’s sales should average $860 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 51 students. The actual operating results for September appear below: Actual Revenue $ 49,560 Instructor wages $ 11,120 Classroom supplies $ 17,540 Utilities $ 1,930 Campus rent $ 4,900 Insurance $ 2,240 Administrative expenses $ 3,572

Answer 1

Solution:

Gourmand Cooking School
Flexible Budget Performance Report
For the month ended June 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Student	51			51			61
Revenue	$49,560.00	$5,700.00	F	$43,860.00	$8,600.00	U	$52,460.00
Expenses:
Instructor Wages	$11,120.00	$720.00	F	$11,840.00	$0.00	None	$11,840.00
Classroom Supplies	$17,540.00	$2,750.00	U	$14,790.00	$2,900.00	F	$17,690.00
Utilities	$1,930.00	$410.00	U	$1,520.00	$0.00	None	$1,520.00
Campus Rent	$4,900.00	$0.00	None	$4,900.00	$0.00	None	$4,900.00
Insurance	$2,240.00	$140.00	U	$2,100.00	$0.00	None	$2,100.00
Administrative Expenses	$3,572.00	$514.00	F	$4,086.00	$60.00	F	$4,146.00
Total expense	$41,302.00	$2,066.00	U	$39,236.00	$2,960.00	F	$42,196.00
Net Operating Income	$8,258.00	$3,634.00	F	$4,624.00	$5,640.00	U	$10,264.00