Question

Albany High School is planning a field trip for senior students. They expected 100 students to participate in the trip but eventually 130 students join the trip. They planned to charge each student a price of $25 for the trip and spend an expense of $20 per student for the trip. Then, they find that the expense of the filed trip goes up to $30 per student, and they have to increase the price for each student to $40.

Budget Actual

Number of students 100 130

Revenue per student $25 $40

Expense per student $20 $30

(1) What is the expense variance? Is it favorable or unfavorable? How would this variance affect the balance of the budget (aka: the profit)? (Hint: Homework 6 templates might be useful for this question, but you don’t need to follow the templates. No need to consider Quantity (input) in this question.)

(2) What is the revenue variance? Is it favorable or unfavorable? How would this variance affect the balance of the budget (aka: the profit)? (Hint: Homework 6 templates might be useful for this question, but you don’t need to follow the templates. No need to consider the Mix in this question.)

(3) What is the total variance (revenue variance and expense variance together)? Is it favorable or unfavorable? How would this variance affect the balance of the budget (aka: the profit)?

Answer 1

Please see the table below. All financials are in $. Please see the second column to understand the mathematics.

	Linkage	Budget, M	Actual, N	Variance (N - M)	State
Number of students	A	100	130
Revenue per student	B	25	40
Cost per student	C	20	30
Revenue	D = A x B	2,500	5,200	2,700	F
[-] Expenses	E = A x C	2,000	3,900	1,900	U
Profits	D - E	500	1,300	800	F

(1) Expense variance = 1,900; Unfavorable. It will adversely impact the profit.

(2) Revenue variance = 2,700; Favorable. It will favorably impact the profits.

(3) Total variance = Reveue variance + cost variance = 2,700 + (-1,900) = 800; Favorable; This is also the variance in the profit itself.