The Gourmand Cooking School runs short cooking courses at its small campus. Mana

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 reports—the 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 company’s cost formulas appear below:

For example, administrative expenses should be $3,700 per month plus $42 per course plus $6 per student. The company’s 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:

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.)

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

Explanation / Answer

Actual Revenue & spending Flexible Activity variance planning Results Variance budget budget Courses 4 4 4 Students 53 53 61 Revenues 50,780 620 F 50160 3520 U 53680 Expenses Instructor wages 11,000 720 F 11720 0 N 11720 Classroom supplies 16,320 2,010 U 14310 2160 F 16470 Utilities 1,900 410 U 1490 0 N 1490 Campus rent 4,800 0 N 4,800 0 N 4,800 insurance 2,340 140 U 2,200 0 N 2,200 Administrative expenses 3,660 526 F 4186 48 F 4234 total expense 40,020 1,314 U 38706 2208 F 40914 net operating income 10,760 694 U 11454 1312 U 12766

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