The Gourmand Cooking School runs short cooking courses at its small campus. Mana

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 62 students enrolled in those two courses. Data concerning the company's cost formulas appear below: Fixed Cost Cost per Cost per per Month Course Student $2,910 Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses $290 $1,210 80 $4,800 $2,400 3,700 43 S 7 For example, administrative expenses should be $3,700 per month plus $43 per course plus $7 per student. The company's sales should average $850 per student. The actual operating results for September appear below: Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 49,800 10,920 $ 17,830 $ 1,940 4,800 $ 2,540 3,732

Explanation / Answer

1) Planning Budget for the month Ended September 30 Revenue 52700 Expenses: Instructor wages 11640 Classroom supplies 17980 Utilities 1530 Campus Rent 4,800 Insurance 2,400 Administrative expense 4306 total expense 42656 Net Operating income 10044 2) Flexible budget for the month Ended September 30 Revenue 47600 Expenses: Instructor wages 11640 Classroom supplies 16240 Utilities 1530 Campus Rent 4,800 Insurance 2,400 Administrative expense 4264 total expense 40874 Net Operating income 6726 Actual Revenue & spending Flexible Activity variance planning Results Variance budget budget Courses 4 4 4 Students 56 56 62 Revenues 49,800 2,200 F 47600 5100 U 52700 Expenses Instructor wages 10,920 720 F 11640 0 N 11640 Classroom supplies 17,830 1,590 U 16240 1740 F 17980 Utilities 1,940 410 U 1530 0 N 1530 Campus rent 4,800 0 N 4,800 0 N 4,800 insurance 2,540 140 U 2,400 0 N 2,400 Administrative expenses 3,732 532 F 4264 42 F 4306 total expense 41,762 888 U 40874 1782 F 42656 net operating income 8,038 1,312 F 6726 3318 U 10044

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