Exercise 9-18 Working with More Than One Cost Driver [LO9-2, LO9-3, LO9-4, LO9-5

Question

Exercise 9-18 Working with More Than One Cost Driver [LO9-2, LO9-3, LO9-4, LO9-5] 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 61 students enrolled in those two courses. Data concerning the company's cost formulas appear below: Cost per per Month Course $ 2,920 Cost per Student Fixed Cost Instructor wages Classroom supplies Utilities Campus rent $300 $ 1,210 $ 70 $ 4,600 $ 2,000 $ 3,600 43 5 Administrative e ses For example, administrative expenses should be $3,600 per month plus $43 per course plus $5 per student. The company's sales should average $880 per student The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 51 students. The actual operating results for September appear below: Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Actual 50,780 $ 10,960 $18,150 $ 1,900 $ 4,600 $ 2,140 $ 3,503 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.)

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Courses 4 4 4 Students 51 51 61 Revenue 50780 5900 F 44880 8800 U 53680 Expenses: Instructor wages 10960 720 F 11680 0 None 11680 Classroom supplies 18150 2850 U 15300 3000 F 18300 Utilities 1900 410 U 1490 0 None 1490 Campus rent 4600 0 None 4600 0 None 4600 Insurance 2140 140 U 2000 0 None 2000 Administrative expenses 3503 524 F 4027 50 F 4077 Total expenses 41253 2156 U 39097 3050 F 42147 Net operating income 9527 3744 F 5783 5750 U 11533

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