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 that 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: Fixed Cost Cost per Cost per per Month Course Student $2,900 Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses $310 $ 1,250 $5,100 2,300 90 3,900 $ 46 $ 5 For example, administrative expenses should be $3,900 per month plus $46 per course plus $5 per student. The company's sales should average $870 per student. The actual operating results for September appear below: Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 50,170 $10,880 $18,760 $ 2,020 $ 5,100 $ 2,440 $ 3,815 Required 1. The Gourmand Cooking School expects to run four courses with a total of 61 students in September. Complete the company's planning budget for this level of activity

Explanation / Answer

Solution:

Part 1 – Planning Budget (4 Courses and 61 Students)

Planning or Master Budget is the budget prepared by the company for a period using the expected activity or budgeted activity by the company. It is prepared at the beginning of the period.

Gourmand Cooking School

Planning Budget

For the Month Ended September 30

Revenue (61 Students x $870)

$53,070

Expenses:

Instructor wages (4 Courses x $2,900)

$11,600

Classroom supplies (61*310)

$18,910

Utilities ($1250 + (4*90))

$1,610

Campus rent

$5,100

Insurance

$2,300

Administrative expenses (3900 + (4*46)+(5*61)

$4,389

Total expense

$43,909

Net Operating Income

$9,161

Part 2 – Flexible Budget

Flexible Budget is the budget for a period prepared by the company using the actual activity performed by the company at standard or budget cost/revenue. It is normally prepared at the end of the period since after knowing the actual activity.

Hence, the actual activity is as follows:

Number of Students in September = 55 Students

Courses offered = 4 Courses

Gourmand Cooking School

Flexible Budget

For the Month Ended September 30

Revenue (55 Students x $870)

$47,850

Expenses:

Instructor wages (4 Courses x $2,900)

$11,600

Classroom supplies (55*310)

$17,050

Utilities ($1250 + (4*90))

$1,610

Campus rent

$5,100

Insurance

$2,300

Administrative expenses (3900 + (4*46)+(5*55)

$4,359

Total expense

$42,019

Net Operating Income

$5,831

Part 3 – Revenue and Spending Variance Report

Revenue and Spending Variance is the different between the actual revenue/expense and how much revenue/expenses should have been, given the actual level of activity for the priod.

In simple words, revenue and spending variance is the different between actual result and flexible budget prepared in part 2

Gourmand Cooking School

Flexible Budget Performance Report

For the Month Ended September 30

Revenue and Spending Variance

Revenue

$2,320

F

Expenses:

Instructor wages

$720

F

Classroom supplies

$1,710

U

Utilities

$410

U

Campus rent

$0

None

Insurance

$140

U

Administrative expenses

$544

F

Total expense

$996

U

Net Operating Income

$1,324

F

Working:

Gourmand Cooking School

Flexible Budget Performance Report

For the Month Ended September 30

Flexible Budget

(as per part 2)

Actual Result

(Given)

Revenue and Spending Variance

Revenue

$47,850

$50,170

$2,320

F

Expenses:

Instructor wages

$11,600

$10,880

$720

F

Classroom supplies

$17,050

$18,760

$1,710

U

Utilities

$1,610

$2,020

$410

U

Campus rent

$5,100

$5,100

$0

None

Insurance

$2,300

$2,440

$140

U

Administrative expenses

$4,359

$3,815

$544

F

Total expense

$42,019

$43,015

$996

U

Net Operating Income

$5,831

$7,155

$1,324

F

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Gourmand Cooking School

Planning Budget

For the Month Ended September 30

Revenue (61 Students x $870)

$53,070

Expenses:

Instructor wages (4 Courses x $2,900)

$11,600

Classroom supplies (61*310)

$18,910

Utilities ($1250 + (4*90))

$1,610

Campus rent

$5,100

Insurance

$2,300

Administrative expenses (3900 + (4*46)+(5*61)

$4,389

Total expense

$43,909

Net Operating Income

$9,161

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.