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 60 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					$	290
Utilities	$	1,230	$	70
Campus rent	$	5,000
Insurance	$	2,400
Administrative expenses	$	4,000	$	45	$	4

For example, administrative expenses should be $4,000 per month plus $45 per course plus $4 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 60 students; however, it actually ran four courses with a total of only 50 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,500
Instructor wages	$	10,880
Classroom supplies	$	17,250
Utilities	$	1,920
Campus rent	$	5,000
Insurance	$	2,540
Administrative expenses	$	3,846

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 Report
For the month ended September 30
	Workings:	Actual results	Revenue and Spending Variances	Flexible Budget	Activity Variance	Planning Budget
Courses	x	4			4			4
Students	y	50			50			60
Revenue	($890* y)	$      50,500	$               6,000	F	$      44,500	$         8,900	U	$    53,400
Expenses:
Instructor wages	($2900* x)	$      10,880	$                   720	F	$      11,600	$                -	None	$    11,600
Classroom supplies	($290* y)	$      17,250	$               2,750	U	$      14,500	$         2,900	F	$    17,400
Utilities	($1230 + $70 * x)	$         1,920	$                   410	U	$         1,510	$                -	None	$      1,510
Campus rent	$                                     5,000	$         5,000	$                      -	None	$         5,000	$                -	None	$      5,000
Insurance	$                                     2,400	$         2,540	$                   140	U	$         2,400	$                -	None	$      2,400
Administrative expenses	[$4000 + ($45 * x) + ($4 * y)]	$         3,846	$                   534	F	$         4,380	$               40	F	$      4,420
Total expenses		$      41,436	$               2,046	U	$      39,390	$         2,940	F	$    42,330
Net operating income		$         9,064	$               3,954	F	$         5,110	$         5,960	U	$    11,070

If it is helpful, please rate the answer and if any doubt arises let me know