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

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:

  
Required:

2. 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). Input all amounts as positive values.)

TipTop Flight School
Variance Report
For the Month Ended July 31 Actual
Results Planning
Budget Variances Lessons 210 205 Revenue $ 52,230 $ 51,250 $ 980 F Expenses: Instructor wages 14,530 14,350 180 U Aircraft depreciation 6,720 6,560 160 U Fuel 3,655 3,075 580 U Maintenance 3,415 3,235 180 U Ground facility expenses 1,910 1,960 50 F Administration 3,435 3,545 110 F Total expense 33,665 32,725 940 U Net operating income $ 18,565 $ 18,525 $ 40 F

Explanation / Answer

Flexible budget Revenue 52500 instructor wages 14700 Aircraft depreciation 6720 fuel 3150 maintenance 3300 Ground facility expense 1970 Administration 3550 Flexible buget = 155lessons * variable component + fixed component Flexible Budget Performance Report Actual Revenue & spending Flexible Activity variance planning Results variance budget budget lessons 210 210 205 Revenue 52,230 270 U 52500 1,250 F 51,250 expenses: instructor wages 14,530 170 F 14700 350 U 14,350 Aircraft depreciation 6,720 0 N 6720 160 U 6,560 fuel 3,655 505 U 3150 75 U 3,075 maintenance 3,415 115 U 3300 65 U 3,235 Ground facility expense 1,910 60 F 1970 10 U 1,960 Administration 3,435 115 F 3550 5 U 3,545 total expense 33,665 275 U 33390 665 U 32,725 net income 18,565 545 U 19110 585 F 18,525

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