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 64 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			$	2,910
Classroom supplies					$	310
Utilities	$	1,240	$	50
Campus rent	$	5,200
Insurance	$	2,200
Administrative expenses	$	3,700	$	42	$	7

For example, administrative expenses should be $3,700 per month plus $42 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 64 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September appear below:

	Actual
Revenue	$	54,060
Instructor wages	$	10,920
Classroom supplies	$	19,690
Utilities	$	1,850
Campus rent	$	5,200
Insurance	$	2,340
Administrative expenses	$	3,742

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

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

Gourmand Cooking Academy
Flexible Budget Performance Report
For the Month Ended October 31
Courses	4			4			4
Students	56	Revenue &		56			64
	Actual	Spending		Flexible	Activity		Planning
	Results	Variances		Budget	Variances		Budget
Revenue	$54,060	$4,220	U	49840	($7,120)	U	56960
Expenses:
Instructor wages	$10,920	($720)	F	11640	$0		11640
Classroom	$19,690	2,330	U	17360	(2,480)	F	19840
Utilities	$1,850	410	U	1440	0		1440
Campus rent	$5,200	0		5200	0		5200
Insurance	$2,340	140	U	2200	0		2200
Administratration	$3,742	(518)	F	4260	(56)	F	4316
Total expense	$43,742	$1,642	F	$42,100	($2,536)	F	$44,636
Net operating income	$10,318	$2,578	U	$7,740	($4,584)	U	$12,324

Working notes for the above answer is as under