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Problem 9-21 Critique a Report; Prepare a Performance Report [LO9-1, LO9-4, LO9-6] TipTop Flight School offers flying lessons at a small municipal airport. The schools

Problem 9-21 Critique a Report; Prepare a Performance Report [LO9-1, LO9-4, LO9-6]

TipTop Flight School offers flying lessons at a small municipal airport. The schools 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:

TipTop Flight School Variance Report For the Month Ended July 31
Actual Results Planning Budget Variances
Lessons 185 180
Revenue $ 41,490 $ 40,500 $ 990 F
Expenses:
Instructor wages 11,520 11,340 180 U
Aircraft depreciation 6,845 6,660 185 U
Fuel 3,710 3,240 470 U
Maintenance 3,260 3,150 110 U
Ground facility expenses 2,420 2,510 90 F
Administration 4,290 4,380 90 F
Total expense 32,045 31,280 765 U
Net operating income $ 9,445 $ 9,220 $ 225 F

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 unfavorable variance.

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

Cost Formulas
Revenue $225q
Instructor wages $63q
Aircraft depreciation $37q
Fuel $18q
Maintenance $ 630 + $14q
Ground facility expenses $1,610 + $5q
Administration $4,200 + $1q

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