Question

The 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 63 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			$	2,940
Classroom supplies					$	310
Utilities	$	1,230	$	75
Campus rent	$	4,700
Insurance	$	2,300
Administrative expenses	$	3,700	$	44	$	6

  

For example, administrative expenses should be $3,700 per month plus $44 per course plus $6 per student. The company’s sales should average $870 per student.

  

The actual operating results for September appear below:

  

		Actual
Revenue	$	51,910
Instructor wages	$	11,040
Classroom supplies	$	19,380
Utilities	$	1,940
Campus rent	$	4,700
Insurance	$	2,440
Administrative expenses	$	3,680

  

Required:
A.	The Gourmand Cooking School expects to run four courses with a total of 63 students in September. Complete the company’s planning budget for this level of activity.
	Revenue: Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income:

B.	The school actually ran four courses with a total of 53 students in September. Complete the company’s flexible budget for this level of activity.

Revenue: Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income:

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.) Revenue: Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income:

Answer 1