2 TipTop Flight School Variance Report For the Month Ended July 31 Actual Planni

Question

2 TipTop Flight School Variance Report For the Month Ended July 31 Actual Planning Results Budget Variances Lessons 145 140 Revenue 36-030 35,000 $1,030 F 7,835 5,365 3,430 3,135 2,145 62 25,535 7,700 ,180 2,800 3,000 2,220 72 135 U 185 U 630 U 135 U 75 F 95 Instructor vages Aircraft depreciation Fuel Ground facility expenses Administration Total expense Net operating income 10,495 10,380 115 F After several months of using such varliance 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 $250g $55g $37g $20q $620$17g $1,800$3g $3,440$2q Instructor vages Aircraft depreciation Fuel Ground facility expenses Administration

Explanation / Answer

Flexible budget performance Report

Actual results

Flexible budget variance = actual-flexible

Favorable/unfavorable/no effect

flexible budget = actual units*standard rate

sales volume variance =flexible-static

variance

static budget

lessons

145

145

140

revenue

36030

-220

U

36250

1250

F

35000

expenses

instructor wages

7835

-140

F

7975

275

U

7700

depreciation

5365

0

no effect

5365

185

U

5180

fuel

3430

530

U

2900

100

U

2800

maintenance

3135

50

U

3085

85

U

3000

ground facility expense

2145

-90

F

2235

15

U

2220

adminstration

3625

-105

F

3730

10

U

3720

total expenses

25535

245

U

25290

670

U

24620

net operating income

10495

-465

U

10960

580

F

10380

Flexible budget performance Report

Actual results

Flexible budget variance = actual-flexible

Favorable/unfavorable/no effect

flexible budget = actual units*standard rate

sales volume variance =flexible-static

variance

static budget

lessons

145

145

140

revenue

36030

-220

U

36250

1250

F

35000

expenses

instructor wages

7835

-140

F

7975

275

U

7700

depreciation

5365

0

no effect

5365

185

U

5180

fuel

3430

530

U

2900

100

U

2800

maintenance

3135

50

U

3085

85

U

3000

ground facility expense

2145

-90

F

2235

15

U

2220

adminstration

3625

-105

F

3730

10

U

3720

total expenses

25535

245

U

25290

670

U

24620

net operating income

10495

-465

U

10960

580

F

10380

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