Question

TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below:

  

TipTop Flight School Variance Report For the Month Ended July 31
	Actual Results		Planning Budget		Variances
Lessons		205		200
Revenue	$	41,920	$	41,000	$	920	F
Expenses:
Instructor wages		13,190		13,000		190	U
Aircraft depreciation		7,790		7,600		190	U
Fuel		4,070		3,600		470	U
Maintenance		2,990		2,860		130	U
Ground facility expenses		2,530		2,630		100	F
Administration		4,305		4,400		95	F
Total expense		34,875		34,090		785	U
Net operating income	$	7,045	$	6,910	$	135	F

After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.  

The planning budget was developed using the following formulas, where q is the number of lessons sold:  

  

	Cost Formulas
Revenue	$205q
Instructor wages	$65q
Aircraft depreciation	$38q
Fuel	$18q
Maintenance	$ 660 + $11q
Ground facility expenses	$1,630 + $5q
Administration	$4,200 + $1q

  

  

Required:

2. Complete the flexible budget performance report for the school for July. (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

• All working forms part of the answer
• Flexible Budget performance as asked

TipTop Flight School
Flexible Budget Performance Report
For the Month Ended July 31
	Actual	Flexible	Variance
	Results	Budget	Difference	F/U/None
	[A]	[B]	[C = A – B]
Lessons	205	205
Revenue	$       41,920.00	$                42,025.00	$                      105.00	U
Expenses:
Instructor wages	$       13,190.00	$                13,325.00	$                      135.00	F
Aircraft depreciation	$          7,790.00	$                  7,790.00	$                                -	N
Fuel	$          4,070.00	$                  3,690.00	$                      380.00	U
Maintenance	$          2,990.00	$                  2,915.00	$                         75.00	U
Ground facility expenses	$          2,530.00	$                  2,655.00	$                      125.00	F
Administration	$          4,305.00	$                  4,405.00	$                      100.00	F
Total expense	$       34,875.00	$                34,780.00	$                         95.00	U
Net operating income	$          7,045.00	$                  7,245.00	$                      200.00	U

Working for above:

TipTop Flight School
Flexible Budget Performance Report
For the Month Ended July 31
	Actual	Flexible
	Results	Budget
Lessons	205	205
Revenue	41920 (A)	=205*205 (A)
Expenses:
Instructor wages	13190	=205*65
Aircraft depreciation	7790	=205*38
Fuel	4070	=205*18
Maintenance	2990	=660+(205*11)
Ground facility expenses	2530	=1630+(205*5)
Administration	4305	=4200+(205*1)
Total expense	TOTAL (B)	TOTAL (B)
Net operating income	(A – B)	(A – B)