FLEXIBLE BUDGETS AND PERFORMANCE ANALYSIS, AND STANDARD COSTING

Excellent Institute offers executive training programmes. It bases its budgets on two measures of activity (i.e., cost drivers): number of executives and number of programmes. The institute uses the following data in its budgeting:

	Fixed element per month ($)	Variable element per executive ($)	Variable element per programme ($)
Revenue	0	336	0
Instructor wages	0	0	2000
Office supplies	0	52	30
Admin expenses	47,700	13	29

In January, the institute budgeted for 1,870 executives and 174 programmes. The institute's income statement showing the actual results for the month appears below:

Excellent Institute Income Statement For the month ended January 31
Actual students	1,670
Actual courses	172
Revenue	$560,600
Expenses: Instructor wages Office supplies Admin expenses	350,110 93,040 85,728
Total expenses	528,878
Net operating income	$31,722

1. produce a flexible budget performance report showing both the institute's activity variances and revenue and spending variances for July. Label each variance as favourable (F) or unfavourable (U).

Fabulous Quality uses a standard cost system. It has established the following standards for one unit of product.

	Standard quantity	Standard price or rate	Standard cost
Direct labour	1.4 hours	$12.00 per hour	$16.80
Direct materials	5 Kg	$3.60 per Kg	$18.00

In April, the company purchased 125,000 Kg of direct material at a total cost of $490,000. The total factory wages for April were $364,000, 95 percent of which were for direct labour. The company manufactured 22,000 units of product during April using 106,000 Kg of direct material and 28,000 direct labour-hours.

2. Determine the followings: Material price variance, material quantity variance, labour rate variance, and labour efficiency variance. Also, what is one possible cause of each variance identified?