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:

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 unfavourable variance.

The static 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 comprehensive performance report for the school for July.

3. Evaluate the school's performance for July.

Transcribed Image Text:

TIPTOP FLIGHT SCHOOL Variance Report For the Month Ended July 31 Actual Static Budget Results Variance Lessons 155 150 $33,900 $33,000 Revenue $900 F Expenses $ 9,870 $ 9,750 Instructor wages . $120 U Aircraft depreciation 5,700 5,890 190 U 2,750 500 U Fuel 2,250 2,450 Maintenance. 2,330 120 U Ground facility expense . 1,540 1,550 10 F Administration . .. 3,320 3,390 70 F Total expense . . 25,820 24,970 850 U $ 50 F $ 8,080 $ 8,030 Operating income. Cost Formulas Revenue Instructor wages Aircraft depreciation Fuel $220q $65q $389 $15q $530 + $12q $1,250 + $2q $3,240 + $1q Maintenance Ground facility expense Administration