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

210

205

Revenue

$

52,230

$

51,250

$

980

F

Expenses:

Instructor wages

14,530

14,350

180

U

Aircraft depreciation

6,720

6,560

160

U

Fuel

3,655

3,075

580

U

Maintenance

3,415

3,235

180

U

Ground facility expenses

1,910

1,960

50

F

Administration

3,435

3,545

110

F

Total expense

33,665

32,725

940

U

Net operating income

$

18,565

$

18,525

$

40

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

$250q

Instructor wages

$70q

Aircraft depreciation

$32q

Fuel

$15q

Maintenance

$570 + $13q

Ground facility expenses

$1,550 + $2q

Administration

$3,340 + $1q

Required:

2. Complete the flexible budget performance report for the school for July. (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.)

Tip Top Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Results 210 Flexible Budget Lessons Planning Budget 205 Revenue $ 52,230 $ 51,250 Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income $ 14,530 6,720 3,655 3,415 1,910 3,435 33,665 $ 18,565 14,350 6,560 3,075 3,235 1,960 3,545 32,725 $ 18,525