Question

he Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that 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			$	2,910
Classroom supplies					$	280
Utilities	$	1,220	$	80
Campus rent	$	5,000
Insurance	$	2,400
Administrative expenses	$	3,800	$	42	$	3

  

For example, administrative expenses should be $3,800 per month plus $42 per course plus $3 per student. The company’s sales should average $900 per student.

  

The actual operating results for September appear below:

  

		Actual
Revenue	$	52,000
Instructor wages	$	10,920
Classroom supplies	$	16,930
Utilities	$	1,950
Campus rent	$	5,000
Insurance	$	2,540
Administrative expenses	$	3,577

  

Required:
1.	The Gourmand Cooking School expects to run four courses with a total of 61 students in September. Complete the company’s planning budget for this level of activity.

     

2.	The school actually ran four courses with a total of 59 students in September. Complete the company’s flexible budget for this level of activity.

     

3.	Calculate the revenue and spending 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