TipTop Flight School offers flying lessons at a small municipal airport. The sch
ID: 2433277 • Letter: T
Question
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:
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:
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).)
TipTop Flight School
Flexible Budget Performance Report
For the Month Ended July 31
Actual Results Revenue and Spending Variances Flexible Budget ActivityVariances
Lessons
Revenue
Expenses:
Instructor wages
Aircraft depreciation
Fuel
Maintenance
Ground facility expenses
Administration
Total expense
Net operating income
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:
Explanation / Answer
Answer:
Tiptop Flight School
Flexible Budget Performance Report
For the Month Ended August 31
Revenue &
Adjusted
Actual
Spending
Flexible
Activity
Planning
Results
Variances
Budget
Variances
Budget
Lessons (q)
165
165
160
Revenue ($225q)
$36,990
($135)
F
$37,125
$1,125
F
$36,000
Expenses:
Instructor wages (($64q)
$10,440
($120)
F
$10,560
$320
U
$10,240
Aircraft depreciation ($36q)
5,940
0
5,940
180
U
5,760
Fuel ($19q)
3,540
405
U
3,135
95
U
3,040
Maintenance ($630 + $13q)
2,820
45
U
2,775
65
U
2,710
Ground Facility Exp. ($1,610 + $3q)
2,010
(95)
F
2,105
15
U
2,090
Administratration ($4180 + $1q)
4,275
(70)
F
4,345
5
U
4,340
Total expense
$29,025
$165
U
$28,860
$680
U
$28,180
Net operating income
$7,965
($300)
U
$8,265
$445
F
$7,820
Tiptop Flight School
Flexible Budget Performance Report
For the Month Ended August 31
Revenue &
Adjusted
Actual
Spending
Flexible
Activity
Planning
Results
Variances
Budget
Variances
Budget
Lessons (q)
165
165
160
Revenue ($225q)
$36,990
($135)
F
$37,125
$1,125
F
$36,000
Expenses:
Instructor wages (($64q)
$10,440
($120)
F
$10,560
$320
U
$10,240
Aircraft depreciation ($36q)
5,940
0
5,940
180
U
5,760
Fuel ($19q)
3,540
405
U
3,135
95
U
3,040
Maintenance ($630 + $13q)
2,820
45
U
2,775
65
U
2,710
Ground Facility Exp. ($1,610 + $3q)
2,010
(95)
F
2,105
15
U
2,090
Administratration ($4180 + $1q)
4,275
(70)
F
4,345
5
U
4,340
Total expense
$29,025
$165
U
$28,860
$680
U
$28,180
Net operating income
$7,965
($300)
U
$8,265
$445
F
$7,820
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