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 65 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			$	2,950
Classroom supplies					$	280
Utilities	$	1,230	$	70
Campus rent	$	4,800
Insurance	$	2,200
Administrative expenses	$	3,900	$	44	$	4

For example, administrative expenses should be $3,900 per month plus $44 per course plus $4 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

	Actual
Revenue	$	53,650
Instructor wages	$	11,080
Classroom supplies	$	18,050
Utilities	$	1,920
Campus rent	$	4,800
Insurance	$	2,340
Administrative expenses	$	3,762

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

GOURMAND COOKING SCHOOL
Flexible Budget Performance Report
For the Month Ended September 30
	Actual Results	Revenue and Spending Variances	Flexible Budget	Activity Variances	Planning Budget
Courses	4.00			4.00			4.00
Students	59.00			59.00			65.00
Revenue	53,650.00	2,320.00	Favorable	51,330.00	5,220.00	UnFavorable	56,550.00
Expenses :
Instructor Wages	11,080.00	720.00	Favorable	11,800.00	-	None	11,800.00
Classroom Supplies	18,050.00	1,530.00	Unfavorable	16,520.00	1,530.00	Favorable	18,200.00
Utilities	1,920.00	410.00	Unfavorable	1,510.00	-	None	1,510.00
Campus Rent	4,800.00	-	None	4,800.00	-	None	4,800.00
Insurance	2,340.00	140.00	Unfavorable	2,200.00	-	None	2,200.00
Administrative Expenses	3,762.00	550.00	Favorable	4,312.00	24.00	Favorable	4,336.00
Total Expense	41,952.00	810.00	Unfavorable	41,142.00	1,704.00	Favorable	42,846.00
Net Operating Income	11,698.00	1,510.00	Favorable	10,188.00	3,516.00	UnFavorable	13,704.00