The Toque Cooking Academy runs short cooking courses at its small campus. Manage

Question

The Toque Cooking Academy 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 four courses in a month and have a total of 62 students enrolled in those four courses. Data concerning the company's cost formulas appear below: For example, administrative expenses should be $3,800 per month plus $42 per course plus $4 per student. The company's sales should average $890 per student. The actual operating results for October appear below: Required: The Toque Cooking Academy expects to run four courses with a total of 62 students in October. Complete the company's planning budget for this level of activity. The school actually ran four courses with a total of 60 students in October. Complete the company's flexible budget for this level of activity. Complete the flexible budget performance report that shows both activity variances and revenue and spending variances for October

Explanation / Answer

Planning Budget:

Calculation of Net Operating Income: Revenue = 890 x 62 = 55,180

Less: Expenses = 43,226 = Net Operating Income = 11,954

2. Flexible Budget:

For 60 Students and 4 classes:

Amount($) Expenses: Instructor Wages 11,720 Classroom Supplies 18,600 Utilities 1,490 Campus Rent 5,100 Insurance 2,100 Administrative Expenses 4,216 Total Expenses 43,226 Net Operating Income 11,954

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