Question

Roberds Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:

	Fixed element per month			Variable element per student			Variable element per course
Revenue	$	0		$	273		$	0
Faculty wages	$	0		$	0		$	3,050
Course supplies	$	0		$	47		$	35
Administrative expenses	$	26,250		$	22		$	47

In March, the school budgeted for 1,860 students and 83 courses. The school's income statement showing the actual results for the month appears below:

Roberds Tech
Income Statement
For the Month Ended March 31
Actual students		1,760
Actual courses		86
Revenue	$	386,340
Expenses:
Faculty wages		212,450
Course supplies		60,090
Administrative expenses		72,062
Total expense		344,602
Net operating income	$	41,738

Required:

Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending variances for March. Label each variance as favorable (F) or unfavorable (U). (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

Roberds Tech
Flexible Budget Report
For the month ended March 31
	Workings:	Actual results	Revenue and Spending Variances		Flexible Budget	Activity Variance		Planning Budget
Students	x	1760			1760			1860
Courses	y	86			86			83
Revenue	($273* x)	$   3,86,340	$             94,140	U	$   4,80,480	$      27,300	U	$5,07,780
Expenses:
Faculty wages	($3050* y)	$   2,12,450	$             49,850	F	$   2,62,300	$         9,150	U	$2,53,150
Course Supplies	($47 * x) + ($35 * y)]	$      60,090	$             25,640	F	$      85,730	$         4,595	F	$    90,325
Administrative expenses	[$26250 + ($22 * x) + ($47 * y)]	$      72,062	$               3,050	U	$      69,012	$         2,059	F	$    71,071
Total expenses		$   3,44,602	$             72,440	F	$   4,17,042	$         2,496	U	$4,14,546
Net operating income		$      41,738	$             21,700	U	$      63,438	$      29,796	U	$    93,234

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