Critique a Report; Prepare a Performance Report [LO1, LO4, LO6]

Wings 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:

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 August, but the report shows an unfavorable variance.

The planning budget was developed using the following formulas, where q is the number of lessons sold:

Required:
1. Should the owner feel frustrated with the variance reports? Explain.
2. Prepare a flexible budget performance report for the school for August.
3. Evaluate t he s chool’s pe rformance f or August.

Transcribed Image Text:

Wings Flight School Variance Report For the Month Ended August 31 Planning Budget 200 Actual Results Variances Lessons 210 Revenue. Expenses: Instructor wages Aircraft depreciation Fuel.... $45,000 $47,300 $2,300 F 12,400 12,910 510 U 11,400 11,970 570 U 4,200 5,150 950 U Maintenance 3,270 3,470 200 U Ground facility expenses 2,440 2,350 90 F Administration... 4,410 4,340 70 F Total expense 38,120 40,190 2,070 U Net operating income. $ 6,880 $ 7,110 $ 230 F