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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

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

155

150

Revenue

$

33,900

$

33,000

$

900

F

Expenses:

Instructor wages

9,870

9,750

120

U

Aircraft depreciation

5,890

5,700

190

U

Fuel

2,750

2,250

500

U

Maintenance

2,450

2,330

120

U

Ground facility expenses

1,540

1,550

10

F

Administration

3,320

3,390

70

F

Total expense

25,820

24,970

850

U

Net operating income

$

8,080

$

8,030

$

50

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

$220q

Instructor wages

$65q

Aircraft depreciation

$38q

Fuel

$15q

Maintenance

$ 530 + $12q

Ground facility expenses

$1,250 + $2q

Administration

$3,240 + $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.)

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