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		175		170
Revenue	$	37,510	$	36,550	$	960	F
Expenses:
Instructor wages		11,230		11,050		180	U
Aircraft depreciation		6,300		6,120		180	U
Fuel		3,540		3,060		480	U
Maintenance		3,150		3,050		100	U
Ground facility expenses		2,065		2,140		75	F
Administration		4,255		4,350		95	F
Total expense		30,540		29,770		770	U
Net operating income	$	6,970	$	6,780	$	190	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	$215q
Instructor wages	$65q
Aircraft depreciation	$36q
Fuel	$18q
Maintenance	$ 670 + $14q
Ground facility expenses	$1,630 + $3q
Administration	$4,180 + $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

TipTop Flight School
flexible budget performance report
for the school for July.
		Revenue &		Adjusted
	Actual	Spending		Flexible	Activity		Planning
	Results	Variances		Budget	Variances		Budget
	175			175			170
Revenue	$37,510	$115	U	$37,625	$1,075	F	$36,550
Less:
Instructor wages	$11,230	$145	F	$11,375	$325	U	$11,050
Aircraft depreciation	6,300	0		6,300	180	U	6,120
Fuel	3,540	390	U	3,150	90	U	3,060
Maintenance	3,150	30	U	3,120	70	U	3,050
Ground facility expenses	2,065	90	F	2,155	15	U	2,140
Administration	4,255	100	F	4,355	5	U	4,350
Total Expanses	$30,540	$85	U	$30,455	$685	U	$29,770
Net operating income	$6,970	$200	U	$7,170	$390	F	$6,780