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 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 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,900 per month plus $45 per course plus $3 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity 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.)

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers 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 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,900 per month plus $45 per course plus $3 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity 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.)

Fixed Cost per Month Cost per Course Cost per
Student Instructor wages $ 2,940 Classroom supplies $ 310 Utilities $ 1,200 $ 70 Campus rent $ 5,200 Insurance $ 2,400 Administrative expenses $ 3,900 $ 45 $ 3

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Students 59 59 61 Courses 4 4 4 Revenue 51390 1120 U 52510 1780 U 54290 Expenses: Instructor wages 11040 720 F 11760 0 None 11760 Classroom supplies 18760 470 U 18290 620 F 18910 Utilities 1890 410 U 1480 0 None 1480 Campus rent 5200 0 None 5200 0 None 5200 Insurance 2540 140 U 2400 0 None 2400 Administrative expenses 3689 568 F 4257 6 F 4263 Total expenses 43119 268 F 43387 626 F 44013 Net operating income 8271 852 U 9123 1154 U 10277

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