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 140 135 Revenue $ 33,420 $ 32,400 $ 1,020 F Expenses: Instructor wages 6,875 6,750 125 U Aircraft depreciation 5,040 4,860 180 U Fuel 3,185 2,565 620 U Maintenance 2,895 2,770 125 U Ground facility expenses 1,950 2,020 70 F Administration 3,465 3,555 90 F Total expense 23,410 22,520 890 U Net operating income $ 10,010 $ 9,880 $ 130 F

Explanation / Answer

TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Results Revenue and spending variances Flexible Budget Activity variances Planning Budget Lessons 140 140 135 Revenue 33420 180 U 33600 1200 F 32400 Expenses: Instructor wages 6875 125 F 7000 250 U 6750 Aircraft depreciation 5,040 0 None 5040 180 U 4860 Fuel 3,185 525 U 2660 95 U 2565 Maintenance 2,895 45 U 2850 80 U 2770 Ground facility expenses 1,950 80 F 2030 10 U 2020 Administration 3,465 95 F 3560 5 U 3555 Total expense 23,410 270 U 23,140 620 U 22,520 Net operating income 10010 450 U 10460 580 F 9880

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