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

For example, administrative expenses should be $3,500 per month plus $41 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 64 students; however, it actually ran four courses with a total of only 60 students. The actual operating results for September appear below:

Fixed Cost per Month Cost per Course Cost per
Student Instructor wages $ 2,940 Classroom supplies $ 300 Utilities $ 1,210 $ 65 Campus rent $ 4,500 Insurance $ 2,200 Administrative expenses $ 3,500 $ 41 $ 5 Gourmand Cooking School Flexible Budget Performance Report For the Month Ended September 30 Flexible Budget Planning Budget Actual Results Courses 4 Students 60 Revenue 52,780 Expenses Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses 11,040 19,050 1,880 4,500 2,340 3,410 42,220 10,560 Total expense Net operating income

Explanation / Answer

Actual results Revenue and spending variances Flexible budget Activity variances Planning budget Courses 4 4 4 Students 60 60 64 Revenue 52780 580 F 52200 3480 U 55680 Expenses: Instructor wages 11040 720 F 11760 0 None 11760 Classroom supplies 19050 1050 U 18000 1200 F 19200 Utilities 1880 410 U 1470 0 None 1470 Campus rent 4500 0 None 4500 0 None 4500 Insurance 2340 140 U 2200 0 None 2200 Administrative expenses 3410 554 F 3964 20 F 3984 Total expenses 42220 326 U 41894 1220 F 43114 Net operating income 10560 254 F 10306 2260 U 12566

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