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 61 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 | $ | 2,930 | |||||
Classroom supplies | $ | 270 | |||||
Utilities | $ | 1,210 | $ | 70 | |||
Campus rent | $ | 4,800 | |||||
Insurance | $ | 2,200 | |||||
Administrative expenses | $ | 3,700 | $ | 42 | $ | 6 | |
For example, administrative expenses should be $3,700 per month plus $42 per course plus $6 per student. The companys sales should average $880 per student.
The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 53 students. The actual operating results for September appear below:
Actual | ||
Revenue | $ | 50,780 |
Instructor wages | $ | 11,000 |
Classroom supplies | $ | 16,320 |
Utilities | $ | 1,900 |
Campus rent | $ | 4,800 |
Insurance | $ | 2,340 |
Administrative expenses | $ | 3,660 |
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 Revenue and Flexible Spending Variances Budget Planning Budget Actual Results Activity Variances Courses 4 4 Students 53 53 61 Revenue 50,780 $53,680 Expenses Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses 11,000 16,320 1,900 4,800 2,340 3,660 40,020 10,760 11,720 14,310 1,490 4,800 2,200 4,186 38,706 11,720 16,470 1,490 4,800 2,200 4,234 40,914 $12,766 720 F 2,010 U 410 U 0 None 2,160 F 0 None 140u 526 F 0 None 0 None 0 None 48 F 2,208 F Total expense Net operating income 1,314
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