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			$	2,940
Classroom supplies					$	270
Utilities	$	1,200	$	80
Campus rent	$	4,800
Insurance	$	2,100
Administrative expenses	$	3,900	$	42	$	4

For example, administrative expenses should be $3,900 per month plus $42 per course plus $4 per student. The company’s sales should average $880 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	$	50,780
Instructor wages	$	11,040
Classroom supplies	$	16,320
Utilities	$	1,930
Campus rent	$	4,800
Insurance	$	2,240
Administrative expenses	$	3,738

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.)

Answer 1

Solution:

Gourmand Cooking School
Flexible Budget Performance Report
For the month ended September 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Student	57			57			61
Revenue	$50,780.00	$620.00	F	$50,160.00	$3,520.00	U	$53,680.00
Expenses:
Instructor Wages	$11,040.00	$720.00	F	$11,760.00	$0.00	None	$11,760.00
Classroom Supplies	$16,320.00	$930.00	U	$15,390.00	$1,080.00	F	$16,470.00
Utilities	$1,930.00	$410.00	U	$1,520.00	$0.00	None	$1,520.00
Campus Rent	$4,800.00	$0.00	None	$4,800.00	$0.00	None	$4,800.00
Insurance	$2,240.00	$140.00	U	$2,100.00	$0.00	None	$2,100.00
Administrative Expenses	$3,738.00	$558.00	F	$4,296.00	$16.00	F	$4,312.00
Total expense	$40,068.00	$202.00	U	$39,866.00	$1,096.00	F	$40,962.00
Net Operating Income	$10,712.00	$418.00	F	$10,294.00	$2,424.00	U	$12,718.00