4 TipTop Flight School offers flying lessons at a small municipal airport. The s

Question

4 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: For the Month Ended July 31 175 170 8,500 140 U 8,640 6.3006,120180 2,410 2,0301,890 140 ,660,69030 P 3.340 3.430907 ages Fuel 1,870 540 U Administration 12,260 12,200 60F 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: wages $364 $114 Puel

Explanation / Answer

2.

Explanations:

Flexible budget has been prepared using the actual quantity of 175

The formulas can be viewed in the table below:

Actual results Revenue and spending variance Flexible budget Activity variance Planning budget Lessons 175 175 170 Revenue 36,640 110 U 36,750 1,050.00 F 35,700 Expenses: Instructor wages 8,640 110 F 8,750 250.00 U 8,500 Aircraft depreciation 6,300 0 None 6,300 180.00 U 6,120 Fuel 2,410 485 U 1,925 55.00 U 1,870 Maintenance 2,030 100 U 1,930 40.00 U 1,890 Ground facility expenses 1,660 40 F 1,700 10.00 U 1,690 Administration 3,340 95 F 3,435 5.00 U 3,430 Total expenses 24,380 340 U 24,040 540.00 U 23,500 Net operating income 12,260 450 U 12,710 510 F 12,200

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