The Toque Cooking Academy runs short cooking courses at its small campus. Manage
ID: 2462368 • Letter: T
Question
The Toque Cooking Academy 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 four courses in a month and have a total of 62 students enrolled in those four courses. Data concerning the company’s cost formulas appear below:
For example, administrative expenses should be $3,600 per month plus $46 per course plus $5 per student. The company’s sales should average $890 per student.
The Toque Cooking Academy expects to run four courses with a total of 62 students in October. Prepare the company’s planning budget for this level of activity. (Input all amounts as positive values.)
The school actually ran four courses with a total of 60 students in October. Prepare the company’s flexible budget for this level of activity. (Input all amounts as positive values.)
Calculate the spending variances for all expense items. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
The Toque Cooking Academy 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 four courses in a month and have a total of 62 students enrolled in those four courses. Data concerning the company’s cost formulas appear below:
Explanation / Answer
1)
Planning Budget is the master budget which is prepared on the budgeted activity level.
Here Budgeted Activity level is ------ Planned Courses Run 4 and Planned Students 62
Toque Cooking Academy
Planning Budget
For the Month Ended October 31
Revenue
$55,180
Expenses:
Instructor Wages
$11,640
Classroom Supplies
$17,980
Utilities
$1,520
Campus rent
$4,900
Insurance
$2,000
Administrative Expenses
$4,094
Total Expenses
$42,134
Net Operating Income
$13,046
Working Note for Planning Budget
Total Revenue and Total Cost based on planned Run Courses and planned Students
Particulars
Fixed Cost
Total Variable Cost (for 4 courses run)
Total Variable Cost for 62 Students
Total
Revenue
$55,180
Expenses:
Instructor Wages
$11,640
$11,640
Classroom Supplies
$17,980
$17,980
Utilities
$1,220
$300
$1,520
Campus rent
$4,900
$4,900
Insurance
$2,000
$2,000
Administrative Expenses
$3,600
$184
$310
$4,094
Total Expenses
$11,720
$12,124
$18,290
$42,134
Net Operating Income
$13,046
2)
Flexible Budget is the budget which is prepared on the basis of actual production but at standard cost.
Toque Cooking Academy
Flexible Budget
For the Month Ended October 31
Revenue
$53,400
Expenses:
Instructor Wages
$11,640
Classroom Supplies
$17,400
Utilities
$1,520
Campus rent
$4,900
Insurance
$2,000
Administrative Expenses
$4,084
Total Expenses
$41,544
Net Operating Income
$11,856
Working note for flexible budget
Total Revenue and Total Cost based on Actual Run Courses and Actual Students
Particulars
Fixed Cost
Total Variable Cost (for 4 courses run)
Total Variable Cost for 60 Students
Total
Revenue
$53,400
Expenses:
Instructor Wages
$11,640
$11,640
Classroom Supplies
$17,400
$17,400
Utilities
$1,220
$300
$1,520
Campus rent
$4,900
$4,900
Insurance
$2,000
$2,000
Administrative Expenses
$3,600
$184
$300
$4,084
Total Expenses
$11,720
$12,124
$17,700
$41,544
Net Operating Income
$11,856
3)
Toque Cooking Academy
Revenue and Spending Variances
For the Month Ended October 31
Revenue and Spending Variance
Revenue
$1,120
U
Expenses:
Instructor Wages
$720
F
Classroom Supplies
$430
U
Utilities
$410
U
Campus rent
$0
None
Insurance
$140
U
Administrative Expenses
$564
F
Total Expenses
$304
F
Net Operating Income
$816
U
Working Note for Revenue and Spending Variances
Toque Cooking Academy
Revenue and Spending Variances
For the Month Ended October 31
Flexible Budget
Actual Result
Revenue & Spending Variance
Revenue
$53,400
$52,280
$1,120
U
Expenses:
Instructor Wages
$11,640
$10,920
$720
F
Classroom Supplies
$17,400
$17,830
$430
U
Utilities
$1,520
$1,930
$410
U
Campus rent
$4,900
$4,900
$0
None
Insurance
$2,000
$2,140
$140
U
Administrative Expenses
$4,084
$3,520
$564
F
Total Expenses
$41,544
$41,240
$304
F
Net Operating Income
$11,856
$11,040
$816
U
Toque Cooking Academy
Planning Budget
For the Month Ended October 31
Revenue
$55,180
Expenses:
Instructor Wages
$11,640
Classroom Supplies
$17,980
Utilities
$1,520
Campus rent
$4,900
Insurance
$2,000
Administrative Expenses
$4,094
Total Expenses
$42,134
Net Operating Income
$13,046
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