Case : Flexible budgets and variance analysis

Mary is a principal of a school which provides education and accommodation for students. The school secretary prepared the following summary of costs for 2020, including a column showing the original budget for 2020.

The School - cost analysis 2020 BUDGET 2020 actual

Number of students 200 180

Fixed costs

Utilities $60,000 $ 64,000

Janitorial services 40,000 38,000

Repairs and maintenance 32,000 28,000

Salaries for non-convent employees 180,000 190,000

Total fixed costs 312,000 320,000

Variable costs

Food 1000,000 920,000

Clothing 90,000 82,000

Laundry & Linen Service 30,000 25,000

Educational costs 60,000 52,000

Allowances 50,000 48,000

Total variable costs 1,230,000 1,127,000

Total Costs 1,542,000 1,447,000

Mary is pleased that total costs were below budget for the year, but she wonders if this is partly due to the fact that the school enrolled fewer children than expected for the year.

Required:

(1)make flexible budget for 2018, based on the number of children actually enrolled in 2020.

Should Mary be satisfied with the school's cost management in 2020? Explain