If possible, please include the explanation. Thank you for your help TipTop Flig

Question

If possible, please include the explanation. Thank you for your help

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 Planning Actual Results Budget Variances Lessons Revenue 185 38,780 180 37,800 980 F Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration 11,340 6,660 3,820 3,110 2,095 4,270 180 U 180 U 400 U 110 U 85 F 90 F 695 U 7,200 285 F 11,160 6,480 3,420 3.000 2,180 4,360 30,600 Total expense Net operating income $ 7.485 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. The planning budget was developed using the following formulas, where q is the number of lessons sold Cost Formulas Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration $210q S62q S36q S19q S 660 S13q $1,640 $3q $4,180 $1q

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Lessons 185 185 180 Revenue 38780 70 U 38850 1050 F 37800 Expenses: Instructor wages 11340 130 F 11470 310 U 11160 Aircraft depreciation 6660 0 None 6660 180 U 6480 Fuel 3820 305 U 3515 95 U 3420 Maintenance 3110 45 U 3065 65 U 3000 Ground facility expenses 2095 100 F 2195 15 U 2180 Administration 4270 95 F 4365 5 U 4360 Total expense 31295 25 U 31270 670 U 30600 net operating income 7485 95 U 7580 380 F 7200

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