Question

Tip Top 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: Tip Top Flight School Variance Report For the Month Ended July 31 Actual Planning Budget 160 35,200 $980 F Results Variances Lessons 165 $36,180 Revenue Expenses: Instructor wages Aircraft depreciation 10,400 5,920 2,880 2,400 2,410 4,340 10,570 6,105 3,340 2,520 2,340 4,260 170 U 185 U 460 U 120 U Fuel Maintenance Ground facility expenses 70 F Administration 80 F Total expense 29,135 785 U 28,350 $ 6,850 $ 7,045 $195 F Net operating income 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: Cost Formulas $220q $65q $37q $18q $640 $11q $1,610 $5q $4,180 $1q Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration

Answer 1

Correct Answer:

Tip Top flight school
Flexible budget performance report
for the month ended July 31
	Actual Results	Revenue and spending variance		Flexible Budget	Activity variance		Planning budget
Lessons	165	0	N	165	5	U	160
Revenue	$                36,180.00	$            (120.00)	U	$           36,300.00	$                1,100.00	F	35200
Expenses:		$                        -
Instructor wages	$                10,570.00	$            (155.00)	F	$           10,725.00	$                   325.00	U	10400
Aircraft Depreciation	$                   6,105.00	$                        -	N	$             6,105.00	$                   185.00	U	5920
Feul	$                   3,340.00	$               370.00	U	$             2,970.00	$                      90.00	U	2880
Maintenance	$                   2,520.00	$                 65.00	U	$             2,455.00	$                      55.00	U	2400
Ground facility expenses	$                   2,340.00	$               (95.00)	F	$             2,435.00	$                      25.00	U	2410
Administrative expenses	$                   4,260.00	$               (85.00)	F	$             4,345.00	$                        5.00	U	4340
		$                        -
Total Expenses	$                29,135.00	$               100.00	U	$           29,035.00	$                   685.00	U	$         28,350.00
Net operating income	$                   7,045.00	$            (220.00)	U	$             7,265.00	$                   415.00	F	$           6,850.00

End of answer.

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