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			$	2,980
Classroom supplies					$	290
Utilities	$	1,240	$	50
Campus rent	$	4,800
Insurance	$	2,000
Administrative expenses	$	3,600	$	46	$	7

For example, administrative expenses should be $3,600 per month plus $46 per course plus $7 per student. The company’s sales should average $890 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	$	51,390
Instructor wages	$	11,200
Classroom supplies	$	17,540
Utilities	$	1,850
Campus rent	$	4,800
Insurance	$	2,140
Administrative expenses	$	3,637

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Gourmand Cooking School

Planning Budget

For the Month Ended Sept 30

Answer 1

1
Gourmand Cooking School
Planning Budget
For the Month Ended Sept 30
Revenue	54290	=890*61
Expenses
Instructor wages	11920	=2980*4
Classroom supplies	17690	=290*61
Utilities	1440	=1240+(50*4)
Campus rent	4800
Insurance	2000
Administrative expenses	4211	=3600+(46*4)+(7*61)
Total expenses	42061
Net operating income	12229
2
Gourmand Cooking School
Flexible Budget
For the Month Ended Sept 30
Revenue	50730	=890*57
Expenses
Instructor wages	11920	=2980*4
Classroom supplies	16530	=290*57
Utilities	1440	=1240+(50*4)
Campus rent	4800
Insurance	2000
Administrative expenses	4183	=3600+(46*4)+(7*57)
Total expenses	40873
Net operating income	9857
3
	Actual	Flexible budget	Revenue and spending variance
Revenue	51390	50730	660	F
Expenses
Instructor wages	11200	11920	720	F
Classroom supplies	17540	16530	1010	U
Utilities	1850	1440	410	U
Campus rent	4800	4800	0	None
Insurance	2140	2000	140	U
Administrative expenses	3637	4183	546	F
Total expenses	41167	40873	294	U
Net operating income	10223	9857	366	F