The Toque Cooking Academy runs short cooking courses at its small campus.Management has identified two cost drivers that it uses in its budgeting and performance reports – the number of courses and the total number of students. For example. the school might run four courses in a month and have a total of 60 students enrolled in those four courses. Data concerning the company’s cost formulas appear below:
| Fixed Cost per month | Cost per Course | Cost per |
Instructor wages |
| $2,980 |
|
Classroom supplies |
|
| $310 |
Utilities | $1,230 | $85 |
|
Campus rent | $5,100 |
|
|
Insurance | $2,340 |
|
|
Administrative expenses | $3,940 | $46 | $7 |
For example, administrative expenses should be $3,940 per month plus $46 per course plus $7 per student. The company’s sales should average $850 per student.
The actual operating results for October appear below:
| Actual |
Revenue | $ 48,100 |
Instructor wages | $ 11,200 |
Classroomsupplies | $ 18,450 |
Utilities | $ 1,980 |
Campus rent | $ 5,100 |
Insurance | $ 2,480 |
Administrative expenses | $ 3,970 |
Required:
1. The Toque Cooking Academy expects to run four courses with a total of 60 students in October. Prepare the company’s planning budget for this level of activity.
2. The school actually ran four courses with a total of 58 students in October. Prepare the companys flexible budget for this level of activity.
3. Prepare a flexible budget performance report that shows both activity variances and revenue and spending variances for October.
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