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 230 225 Revenue $ 66,350 $ 65,250 $ 1,100 F Expenses: Instructor wages 14,830 14,625 205 U Aircraft depreciation 8,050 7,875 175 U Fuel 5,200 4,500 700 U Maintenance 4,720 4,515 205 U Ground facility expenses 3,025 3,050 25 F Administration 4,175 4,255 80 F Total expense 40,000 38,820 1,180 U Net operating income $ 26,350 $ 26,430 $ 80 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 $290q Instructor wages $65q Aircraft depreciation $35q Fuel $20q Maintenance $690 + $17q Ground facility expenses $2,150 + $4q Administration $3,580 + $3q Required: 2. Complete the flexible budget performance report for the school for July

Answer 1

			Flexible budget
Revenue			66700
instructor wages			14950
Aircraft depreciation			8050
fuel			4600
maintenance			4600
Ground facility expense			3070
Administration			4270
		Flexible buget = 155lessons * variable component + fixed component
		Flexible Budget Performance Report
		Actual	Revenue & spending		Flexible	Activity variance		planning
		Results	variance		budget			budget
lessons		230			230			225
Revenue		66,350	350	U	66700	1,450	F	65,250
expenses:
instructor wages		14,830	120	F	14950	325	U	14,625
Aircraft depreciation		8,050	0	N	8050	175	U	7,875
fuel		5,200	600	U	4600	100	U	4,500
maintenance		4,720	120	U	4600	85	U	4,515
Ground facility expense		3,025	45	F	3070	20	U	3,050
Administration		4,175	95	F	4270	15	U	4,255
total expense		40,000	460	U	39540	720	U	38,820
net income		26,350	810	U	27160	730	F	26,430