The Gourmand Cooking School runs short cooking courses at its small campus. Mana
ID: 2534604 • Letter: T
Question
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers 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 65 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:
For example, administrative expenses should be $3,800 per month plus $41 per course plus $6 per student. The company’s sales should average $870 per student.
The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:
Required:
Prepare a 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.)
Fixed Cost per Month Cost per Course Cost perStudent Instructor wages $ 2,960 Classroom supplies $ 270 Utilities $ 1,210 $ 70 Campus rent $ 4,700 Insurance $ 2,000 Administrative expenses $ 3,800 $ 41 $ 6
Explanation / Answer
Answers
Gourmand Cooking School
Flexible Budget Performance Report
For the Month Ended September 30
Actual Results
Variance
Flexible Budget
Variance
Planning Budget
Courses
4
0
None
4
0
None
4
Students
59
0
None
59
6
Unfavourable
65
Revenue
$ 53,650.00
$ 2,320.00
Favourable
$ 51,330.00
$ 5,220.00
Unfavourable
$ 56,550.00
Expenses:
Instructor wages
$ 11,120.00
$ 720.00
Favourable
$ 11,840.00
$ -
None
$ 11,840.00
Classroom supplies
$ 17,400.00
$ 1,470.00
Unfavourable
$ 15,930.00
$ 1,620.00
Favourable
$ 17,550.00
Utilities
$ 1,900.00
$ 410.00
Unfavourable
$ 1,490.00
$ -
None
$ 1,490.00
Campus rent
$ 4,700.00
$ -
None
$ 4,700.00
$ -
None
$ 4,700.00
Insurance
$ 2,140.00
$ 140.00
Unfavourable
$ 2,000.00
$ -
None
$ 2,000.00
Administrative expenses
$ 3,780.00
$ 538.00
Favourable
$ 4,318.00
$ 36.00
Favourable
$ 4,354.00
Total expense
$ 41,040.00
$ 762.00
Unfavourable
$ 40,278.00
$ 1,656.00
Favourable
$ 41,934.00
Net operating income
$ 12,610.00
$ 1,558.00
Favourable
$ 11,052.00
$ 3,564.00
Unfavourable
$ 14,616.00
Actual Results
Flexible Budget
Planning Budget
Courses
4
4
4
Students
59
59
65
Revenue
53650
=59*870
=65*870
Expenses:
Instructor wages
11120
=2960*4
=2960*4
Classroom supplies
17400
=270*59
=270*65
Utilities
1900
=1210+(70*4)
=1210+(70*4)
Campus rent
4700
4700
4700
Insurance
2140
2000
2000
Administrative expenses
3780
=3800+(41*4)+(6*59)
=3800+(41*4)+(6*65)
Gourmand Cooking School
Flexible Budget Performance Report
For the Month Ended September 30
Actual Results
Variance
Flexible Budget
Variance
Planning Budget
Courses
4
0
None
4
0
None
4
Students
59
0
None
59
6
Unfavourable
65
Revenue
$ 53,650.00
$ 2,320.00
Favourable
$ 51,330.00
$ 5,220.00
Unfavourable
$ 56,550.00
Expenses:
Instructor wages
$ 11,120.00
$ 720.00
Favourable
$ 11,840.00
$ -
None
$ 11,840.00
Classroom supplies
$ 17,400.00
$ 1,470.00
Unfavourable
$ 15,930.00
$ 1,620.00
Favourable
$ 17,550.00
Utilities
$ 1,900.00
$ 410.00
Unfavourable
$ 1,490.00
$ -
None
$ 1,490.00
Campus rent
$ 4,700.00
$ -
None
$ 4,700.00
$ -
None
$ 4,700.00
Insurance
$ 2,140.00
$ 140.00
Unfavourable
$ 2,000.00
$ -
None
$ 2,000.00
Administrative expenses
$ 3,780.00
$ 538.00
Favourable
$ 4,318.00
$ 36.00
Favourable
$ 4,354.00
Total expense
$ 41,040.00
$ 762.00
Unfavourable
$ 40,278.00
$ 1,656.00
Favourable
$ 41,934.00
Net operating income
$ 12,610.00
$ 1,558.00
Favourable
$ 11,052.00
$ 3,564.00
Unfavourable
$ 14,616.00
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