2 Problem 9-22 Critique a Report; Prepare a Performance Report [LO9-1, L09-2, LO

Question

2 Problem 9-22 Critique a Report; Prepare a Performance Report [LO9-1, L09-2, LO9-3, LO9-4, LO9-6) 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: 0 oints TipTop Flight School Variance Report For the Month Ended July 31 eBook Actual Planning Results Budget Variances Print Lessons 145 140 References Revenue S 33,110 $ 32,280 $ 910 F Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration 8,510 8,400 110 U 4,35 4,2 15 U 510 U 2,470 1,960 1,465 3,265 22,070 s 11,640 1,480 15 F 75 F 790 U 3,340 21,280 Total expense Net operating income 10,920 120F 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: Cost Formulas Revenue Instructor wages Aircraft depreciation Fuel $230q $68q $30q

Explanation / Answer

Tip top flight school Flexible Budget Performance Report For the Month Ended July 31 Revenue & Adjusted Actual Spending Flexible Activity Planning Results Variances Budget Variances Budget Lessons (q) 145 145 140 Revenue ($230q) $33,110 ($240) F $33,350 $1,150 F $32,200 Expenses:      Instructor wages (($60q) $8,510 ($190) F $8,700 $300 U $8,400      Aircraft depreciation ($30q) 4,350 $0 4,350 150 U 4,200      Fuel ($14q) 2,470 $440 U 2,030 70 U 1,960      Maintenance ($500 + $10q) 2,010 $60 U 1,950 50 U 1,900      Ground Facility Exp. ($1,200 + $2q) 1,465 ($25) F 1,490 10 U 1,480      Administratration ($3200 + $1q) 3,265 ($80) F 3,345 5 U 3,340 Total expense $22,070 $205 U 21,865 $585 U 21,280 Net operating income $11,040 ($445) U 11,485 $565 F 10,920

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