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: TipTop Flight School Variance Report For the Month Ended July 31 Actual Results Planning Budget Variances Lessons 230 225 Revenue $ 66,350 $ 65,250 $ 1,100 F Expenses: Instructor wages 14,830 14,625 205 U Aircraft depreciation 8,050 7,875 175 U Fuel 5,200 4,500 700 U Maintenance 4,720 4,515 205 U Ground facility expenses 3,025 3,050 25 F Administration 4,175 4,255 80 F Total expense 40,000 38,820 1,180 U Net operating income $ 26,350 $ 26,430 $ 80 F 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 $290q Instructor wages $65q Aircraft depreciation $35q Fuel $20q Maintenance $690 + $17q Ground facility expenses $2,150 + $4q Administration $3,580 + $3q Required: 2. Complete the flexible budget performance report for the school for July

Explanation / Answer

Flexible budget Revenue 66700 instructor wages 14950 Aircraft depreciation 8050 fuel 4600 maintenance 4600 Ground facility expense 3070 Administration 4270 Flexible buget = 155lessons * variable component + fixed component Flexible Budget Performance Report Actual Revenue & spending Flexible Activity variance planning Results variance budget budget lessons 230 230 225 Revenue 66,350 350 U 66700 1,450 F 65,250 expenses: instructor wages 14,830 120 F 14950 325 U 14,625 Aircraft depreciation 8,050 0 N 8050 175 U 7,875 fuel 5,200 600 U 4600 100 U 4,500 maintenance 4,720 120 U 4600 85 U 4,515 Ground facility expense 3,025 45 F 3070 20 U 3,050 Administration 4,175 95 F 4270 15 U 4,255 total expense 40,000 460 U 39540 720 U 38,820 net income 26,350 810 U 27160 730 F 26,430

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