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: Variances $900 F TipTop Flight School Variance Report For the Month Ended July 31 Actual Planning Results Budget Lessons 155 150 Revenue $33,900 $33,000 Expenses: Instructor wages 70 9,750 Aircraft depreciation 5,890 5,700 Fuel 2,750 2,250 Maintenance 2,450 2,330 Ground facility expenses 1,540 1,550 Administration 3,320 3,390 Total expense 25,820 24,970 Net operating income $ 8,080 $ 8,030 120U 190 U 500U 120 U 10 F 70 F 850 U $ 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 $2209 $659 Instructor wages Aircraft depreciation Fuel $389 Maintenance $159 $530+ $129 $1,250 + $29 $3,240 + $19 Ground facility expenses Administration Required: 1. Should the owner feel frustrated with the variance reports? Explain. Calculate all variances and be sure to label them as Favorable or Unfavorable. TipTop Flight School 2. Flexible budget performance report Flexible budget Variance Actual Results FU Flexible budget Volume variances FU Static Budget Lessons Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income