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 61 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			$	2,960
Classroom supplies					$	300
Utilities	$	1,230	$	75
Campus rent	$	4,900
Insurance	$	2,400
Administrative expenses	$	3,600	$	44	$	7

For example, administrative expenses should be $3,600 per month plus $44 per course plus $7 per student. The company’s sales should average $900 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 55 students. The actual operating results for September appear below:

	Actual
Revenue	$	52,000
Instructor wages	$	11,120
Classroom supplies	$	18,150
Utilities	$	1,940
Campus rent	$	4,900
Insurance	$	2,540
Administrative expenses	$	3,629

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.)

	Gourmand Cooking School Flexible Budget Performance Report For the Month Ended September 30 Actual Results Flexible Budget Planning Budget Courses 4 Students 55 Revenue $52,000 Expenses: Instructor wages 11,120 Classroom supplies 18,150 Utilities 1,940 Campus rent 4,900 Insurance 2,540 Administrative expenses 3,629 Total expense 42,279 Net operating income $9,721

Answer 1