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

For example, administrative expenses should be $3,800 per month plus $44 per course plus $5 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 57 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 $ 2,920 Classroom supplies $ 280 Utilities $ 1,220 $ 75 Campus rent $ 5,000 Insurance $ 2,200 Administrative expenses $ 3,800 $ 44 $ 5

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Course 4 4 4 Student 57 57 63 Revenue 51910 2320 F 49590 5220 U 54810 Expenses: Instructor wages 10960 720 F 11680 0 None 11680 Classroom supplies 17490 1530 U 15960 1680 F 17640 Utilities 1930 410 U 1520 0 None 1520 Campus rent 5000 0 None 5000 0 None 5000 Insurance 2340 140 U 2200 0 None 2200 Administrative expenses 3717 544 F 4261 30 F 4291 Total expenses 41437 816 U 40621 1710 F 42331 Net operating income 10473 1504 F 8969 3510 U 12479

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