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			$	2,940
Classroom supplies					$	290
Utilities	$	1,250	$	60
Campus rent	$	5,200
Insurance	$	2,200
Administrative expenses	$	3,600	$	42	$	4

For example, administrative expenses should be $3,600 per month plus $42 per course plus $4 per student. The company’s sales should average $880 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 58 students. The actual operating results for September appear below:

	Actual
Revenue	$	53,420
Instructor wages	$	11,040
Classroom supplies	$	18,410
Utilities	$	1,900
Campus rent	$	5,200
Insurance	$	2,340
Administrative expenses	$	3,450

Required:

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

Answer 1

Answer-

GOURMAND COOKING SCHOOL
FLEXIBLE BUDGET PERFORMANCE REPORT
For the month ended September
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	2380	Favorable	-5280	Unfavorable
Less:-Expenses
Instructor wages	720	Favorable	0	None
Classroom supplies	-1590	Unfavorable	1740	Favorable
Utilities	-410	Unfavorable	0	None
Campus rent	0	None	0	None
Insurance	-140	Unfavorable	0	None
Administrative expenses	550	Favorable	24	Favorable
Total Expenses	-870	Unfavorable	1764	Favorable
Income from opreations	1510	Favorable	-3516	Unfavorable

Explanation-

GOURMAND COOKING SCHOOL
Revenue & Spending Variances
For the month ended September
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	58 students*$880 per student	51040	53420	2380	Favorable
Less:-Expenses
Instructor wages	4 courses*$2940 per course	11760	11040	720	Favorable
Classroom supplies	58 students*$290 per student	16820	18410	-1590	Unfavorable
Utilities	(4 courses*$60 per course)+$1250	1490	1900	-410	Unfavorable
Campus rent		5200	5200	0	None
Insurance		2200	2340	-140	Unfavorable
Administrative expenses	(4 courses*$42 per course)+(58 students*$4 per student)+$3600	4000	3450	550	Favorable
Total Expenses		41470	42340	-870	Unfavorable
Income from operations		9570	11080	1510	Favorable
GOURMAND COOKING SCHOOL
Activity Variance
For the month ended September
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	64 students*$880 per student= $56320	51040	-5280	Unfavorable
Less:-Expenses
Instructor wages	4 courses*$2940 per course = $11760	11760	0	None
Classroom supplies	64 students*$290 per student = $18560	16820	1740	Favorable
Utilities	(4 courses*$60 per course)+$1250= $1490	1490	0	None
Campus rent	5200	5200	0	None
Insurance	2200	2200	0	None
Administrative expenses	(4 courses*$42 per course)+(64 students*$4 per student)+$3600 = $4024	4000	24	Favorable
Total Expenses	43234	41470	1764	Favorable
Income from operations	13086	9570	-3516	Unfavorable