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			$	2,900
Classroom supplies					$	260
Utilities	$	1,220	$	70
Campus rent	$	4,500
Insurance	$	2,100
Administrative expenses	$	3,500	$	42	$	4

For example, administrative expenses should be $3,500 per month plus $42 per course plus $4 per student. The company’s sales should average $900 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 54 students. The actual operating results for September appear below:

	Actual
Revenue	$	54,700
Instructor wages	$	10,880
Classroom supplies	$	16,490
Utilities	$	1,910
Campus rent	$	4,500
Insurance	$	2,240
Administrative expenses	$	3,350

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.)

SOME OF MY NUMBERS ARE WRONG, PLEASE HELP!!!!

Answer 1

• Requirement

	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Courses	4			4			4
Students	54			54			64
Revenues	$                 54,700.00	$            6,100.00	Favourable	$        48,600.00	$           9,000.00	Unfavourable	$        57,600.00
Expenses:
Instructer Wages	$                 10,880.00	$                720.00	Favourable	$        11,600.00	$                        -	None	$        11,600.00
Classroom supplies	$                 16,490.00	$            2,450.00	Unfavourable	$        14,040.00	$           2,600.00	Favourable	$        16,640.00
Utilities	$                   1,910.00	$                410.00	Unfavourable	$          1,500.00	$                        -	None	$          1,500.00
Campus Rent	$                   4,500.00	$                         -	None	$          4,500.00	$                        -	None	$          4,500.00
Insurance	$                   2,240.00	$                140.00	Unfavourable	$          2,100.00	$                        -	None	$          2,100.00
Administrative expenses	$                   3,350.00	$                534.00	Favourable	$          3,884.00	$                 40.00	Favourable	$          3,924.00
Total Expenses	$                 39,370.00	$            1,746.00	Unfavourable	$        37,624.00	$           2,640.00	Favourable	$        40,264.00
Net Operating Income	$                 15,330.00	$            4,354.00	Favourable	$        10,976.00	$           6,360.00	Unfavourable	$        17,336.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Courses	4	4	4
Students	54	54	64
Revenues	$                 54,700.00	=54*900	=64*900
Expenses:
Instructer Wages	$                 10,880.00	=2900*4	=2900*4
Classroom supplies	$                 16,490.00	=260*54	=260*64
Utilities	$                   1,910.00	=1220+(70*4)	=1220+(70*4)
Campus Rent	$                   4,500.00	4500	4500
Insurance	$                   2,240.00	2100	2100
Administrative expenses	$                   3,350.00	=3500+(42*4)+(4*54)	=3500+(42*4)+(4*64)

Conceptual notes:

#1: Flexible Budget data is based on 'budgeted rates' applied on 'actual level/output/units'

#2: Spending Variance = Difference between 'Actual data' and 'Flexible Budget data'

#3: Activity Variance = Difference between 'Flexible Budget data' and 'Static/Planned Budget data'.

* Favourable Variance in case of Revenues occurs when:

>Actual revenues are MORE than Flexible budget revenues [Spending Variance]

>Flexible budget revenues are MORE than Static/Planned budget revenues [Activity Variance]

* Unfavourable Variance in case of Revenues occurs when:

>Actual revenues are LESS than Flexible budget revenues [Spending Variance]

>Flexible budget revenues are LESS than Static/Planned budget revenues [Activity Variance]

* Favourable Variance in case of Expenses/Costs occurs when:

>Actual expenses/costs are LESS than Flexible budget expense/costs [Spending Variance]

>Flexible budget expenses/costs are LESS than Static/Planned budget expenses/costs [Activity Variance]

* Unfavourable Variance in case of Expenses/Costs occurs when:

>Actual expenses/costs are MORE than Flexible budget expense/costs [Spending Variance]

>Flexible budget expenses/costs are MORE than Static/Planned budget expenses/costs [Activity Variance]