value: 3.60 points TipTop Flight School offers flying lessons at a small municip

Question

value: 3.60 points 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 Expenses 195 39,880 190 38,950 930 F Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration 12,520 7,605 4,100 2,870 2,135 4,285 33,515 12,350 7,410 3,610 2,740 2,220 4,380 32,710 170 U 195 U 490 U 130 U 85 F 805 U Total expense Net operating income S 6,365 6,240 S 125 F 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 g is the number of lessons sold:

Explanation / Answer

Actual Revenue and Spending variances Flexible budget Activity variances Planning budget Lessons 195 195 190 Revenue 39880 95 U 39975 1025 F 38950 Expenses: Instructor wages 12520 155 F 12675 325 U 12350 Aircraft depreciation 7605 0 None 7605 195 U 7410 Fuel 4100 395 U 3705 95 U 3610 Maintenance 2870 75 U 2795 55 U 2740 Ground faciltiy expenses 2135 100 F 2235 15 U 2220 Administration 4285 100 F 4385 5 U 4380 Total expense 33515 115 U 33400 690 U 32710 Net operating income 6365 210 U 6575 335 F 6240

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