The Gourmand Cooking School runs short cooking courses at its small campus. Mana
ID: 2555895 • Letter: T
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 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 $ 2,950 Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses $290 $1,220 $ 75 $ 4,700 $2,900 $3,500 42 $3 For example, administrative expenses should be $3,500 per month plus $42 per course plus $3 per student. The company's sales should average $880 per student. The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 60 students. The actual operating results for September appear below Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 51,668 $ 11,088 $ 17,830 $ 1,930 $ 4,70e $ 2,148 $ 3,280Explanation / Answer
Actual Revenue and spending variances Flexible budget Activity variances Planning budget Courses 4 4 4 Students 60 60 62 Revenue 51660 1140 U 52800 1760 U 54560 Expenses: Instructor wages 11080 720 F 11800 0 None 11800 Classroom supplies 17830 430 U 17400 580 F 17980 Utilities 1930 410 U 1520 0 None 1520 Campus rent 4700 0 None 4700 0 None 4700 Insurance 2140 140 U 2000 0 None 2000 Administrative expenses 3280 568 F 3848 6 F 3854 Total expenses 40960 308 F 41268 586 F 41854 Net operating income 10700 832 U 11532 1174 U 12706 Administrative expenses calculation: Flexible budget=3500+(4*42)+(3*60) Planning budget=3500+(4*42)+(3*62)
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