TipTop Flight School offers flying lessons at a small municipal airport. The sch

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 Planning Results Budget Variances Lessons 140 135 $ 33,420 32,400 S1,020 F Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expense Administration 125 U 180 U 620 U 125 U 70 F 90 F 890 U 10,010 $ 9,880 130 F 6,750 4,860 2,565 2,770 2,020 3,555 23,41022,520 6,875 5, 040 3,185 2,895 1,950 3,465 Total expense Net operating income 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

Explanation / Answer

Flexible budget performance report :

Actual results Revenue and spending variance Flexible budget Activity variance Static budget Lessons 140 140 135 Revenue 33420 180 U 33600 1200 F 32400 Expenses Instructor wages 6875 125 F 7000 250 U 6750 Aircraft depreciation 5040 None 5040 180 U 4860 Fuel 3185 525 U 2660 95 U 2565 Maintenance 2895 45 U 2850 80 U 2770 Ground facility expenses 1950 80 F 2030 10 U 2020 Administration 3465 95 F 3560 5 U 3555 Total expense 23410 270 U 23140 620 U 22520 Net operating income 10010 450 U 10460 580 F 9880

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