TipTop Flight School offers flying lessons at a small municipal airport. The school's 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 Planning Budget Variances Lessons Results 210 205 $ 54,370 $ 53,300 $1,070 F Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income 15,550 15,375 175 U 6,720 6,560 1600 4,155 3,485 670 U 3,705 3,530 175 U 2,685 2,615 10 3.790 3,930 140 F 36,525 35,495 1,030 U $ 17,845 $ 17,505 $ 40F After several months of using these 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 is the number of lessons sold Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Cost Formulas $2604 $759 $320 $179 5660+ $149 $2,000 $39 $3,520 + $29 D TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Revenue and Spending Results Variances 210 Flexible Budget Activity Variances Planning Budget 205 Lessons $ 54,370 $ 53,300 Revenue Expenses Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income 15,550 6.720 4.155 3.705 2.605 3.790 36,525 $ 17,845 15,375 6,560 3,485 3,530 2,615 3,930 35,495 $ 17,805