Question

TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below:

TipTop Flight School Variance Report For the Month Ended July 31
	Actual Results			Planning Budget			Variances
Lessons		200			195
Revenue	$	49,810		$	48,750		$	1,060	F
Expenses:
Instructor wages		13,815			13,650			165	U
Aircraft depreciation		8,000			7,800			200	U
Fuel		3,780			3,120			660	U
Maintenance		3,350			3,185			165	U
Ground facility expenses		2,250			2,340			90	F
Administration		3,575			3,695			120	F
Total expense		34,770			33,790			980	U
Net operating income	$	15,040		$	14,960		$	80	F

After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.

The planning budget was developed using the following formulas, where q is the number of lessons sold:

	Cost Formulas
Revenue	$250q
Instructor wages	$70q
Aircraft depreciation	$40q
Fuel	$16q
Maintenance	$650 + $13q
Ground facility expenses	$1,950 + $2q
Administration	$3,500 + $1q

  
Required:

2. Complete the flexible budget performance report for the school for July. (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

Answer-

TipTop Flight School
Flexible Budget Performance Report
For the month ended July 31
Particulars	Actual Results	Variance	Remark	Flexible Budget	Variance	Remark	Planning Budget
	$	$		$	$		$
Revenue	49810	-190	Unfavorable	50000	1250	Favorable	48750
Less:-Expenses
Instructor wages	13815	185	Favorable	14000	-350	Unfavorable	13650
Aircraft depreciation	8000	0	None	8000	-200	Unfavorable	7800
Fuel	3780	-580	Unfavorable	3200	-80	Unfavorable	3120
Maintenance	3350	-100	Unfavorable	3250	-65	Unfavorable	3185
Ground facility expenses	2250	100	Favorable	2350	-10	Unfavorable	2340
Administration	3575	125	Favorable	3700	-5	Unfavorable	3695
Total Expenses	34770	-270	Unfavorable	34500	-710	Unfavorable	33790
Net Opreating income	15040	-460	Unfavorable	15500	540	Favorable	14960

Explanation-

TipTop Flight School
Flexible Budget
For the month ended July 31
Particulars		Amount
		$
Revenue	200 lessons*$250 per lesson	50000
Less:-Expenses
Instructor wages	200 lessons*$70 per lesson	14000
Aircraft depreciation	200 lessons*$40 per lesson	8000
Fuel	200 lessons*$16 per lesson	3200
Maintenance	(200 lessons*$13 per lesson)+$650	3250
Ground facility expenses	(200 lessons*$2 per lesson)+$1950	2350
Administration	(200 lessons*$1 per lesson)+$3500	3700
Total Expenses		34500
Net Opreating income		15500