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:

TipTop Flight School
Variance Report
For the Month Ended July 31 Actual
Results Planning
Budget Variances Lessons 220 215 Revenue $ 56,890 $ 55,900 $ 990 F Expenses: Instructor wages 16,315 16,125 190 U Aircraft depreciation 7,260 7,095 165 U Fuel 4,030 3,440 590 U Maintenance 3,780 3,590 190 U Ground facility expenses 2,190 2,245 55 F Administration 3,675 3,790 115 F Total expense 37,250 36,285 965 U Net operating income $ 19,640 $ 19,615 $ 25 F 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 Flexible Budget Performance Report For the Month Ended July 31 Actual Results Flexible Budget Planning Budget Lessons 220 215 Revenue $ 56,890 $ 55,900 Expenses Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration $ 16,315 7,260 4,030 3,780 2,190 3,675 37,250 $ 19,640 16,125 7,095 3,440 3,590 2,245 3,790 36,285 $ 19,615 Total expense Net operating income

Explanation / Answer

Ans. Tip Top Flight School Flexible Budget Performance Report for the Month Ended July 31 Actual Revenue & Spending variance Flexible Sales Activity variance Planning Results Budget Budget Lessons: 220 220 215 Revenue 56890 310 U 57200 1300 F 55900 Expenses: Intructor wages 16315 185 F 16500 375 U 16125 Aircraft depreciation 7260 0 No effect 7260 165 U 7095 Fuel 4030 510 U 3520 80 U 3440 Maintemance 3780 120 U 3660 70 U 3590 Ground facility expenses 2190 70 F 2260 15 U 2245 Administration 3675 125 F 3800 10 U 3790 Total expenses 37250 250 U 37000 715 U 36285 Net operating income 19640 560 U 20200 585 F 19615 *Calculation for flexible budget: Revenue 260*220 Intructor wages 75*220 Aircraft depreciation 33*220 Fuel 16*220 Maintemance 580+(14*220) Ground facility expenses 1600+(3*220) Administration 3360+(2*220) *Revenue & Spending variance =   Actual results - Flexible budget *Sales Actvity variance =   Flexible budget - Planning budget *Increase in sales & operaitng income from planning to flexible and flexible to actual   =    Favorable. *Decrease in sales & operaitng income from planning to flexible and flexible to actual   =    Unfavorable. *Decresae in Costs from planning to flexible and flexible to actual = Favorable. *Incresae in Costs from planning to flexible and flexible to actual = Unfavorable.

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