Question
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reportsthe number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 62 students enrolled in those two courses. Data concerning the companys cost formulas appear below:
Fixed Cost per Month | Cost per Course | Cost per Student | |||||
Instructor wages | $ | 2,900 | |||||
Classroom supplies | $ | 270 | |||||
Utilities | $ | 1,230 | $ | 60 | |||
Campus rent | $ | 5,200 | |||||
Insurance | $ | 2,400 | |||||
Administrative expenses | $ | 3,700 | $ | 43 | $ | 7 | |
For example, administrative expenses should be $3,700 per month plus $43 per course plus $7 per student. The companys sales should average $890 per student.
The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:
Actual | ||
Revenue | $ | 52,280 |
Instructor wages | $ | 10,880 |
Classroom supplies | $ | 16,590 |
Utilities | $ | 1,880 |
Campus rent | $ | 5,200 |
Insurance | $ | 2,540 |
Administrative expenses | $ | 3,732 |
Required:
Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Gourmand Cooking School Flexible Budget Performance Report For the Month Ended September 30 Actual Results Flexible Budget Planning Budget Courses 4 Students 54 Revenue $ 52,280 10,880 16,590 1,880 Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense Net operating income 5,200 2,540 3,732 40,822 $ 11,458
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