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 that 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 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

   

  

For example, administrative expenses should be $3,500 per month plus $41 per course plus $6 per student. The company’s sales should average $890 per student.

  

  

  

The Gourmand Cooking School expects to run four courses with a total of 62 students in September. Complete the company’s planning budget for this level of activity.

      

The school actually ran four courses with a total of 56 students in September. Complete the company’s flexible budget for this level of activity.

      

Complete the 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.)

     

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that 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 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

Explanation / Answer

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Courses Students Expected in Budget 4 62 Company's Planning Budget   Revenue (62 x $890)                                               55,180 Fixed Expenses Expenses on Course Expenses on No. of Students   Instructor wages                                               11,800                            11,800   Classroom supplies                                               18,600                                               18,600   Utilities                                                 1,410                       1,210                                  200   Campus rent                                                 4,800                       4,800   Insurance                                                 2,400                       2,400   Administrative expenses                                                 4,036                       3,500                                  164                                                     372 Net Income                                               12,134

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