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 145 140 Revenue $ 33,110 $ 32,200 $ 910 F Expenses: Instructor wages 8,510 8,400 110 U Aircraft depreciation 4,350 4,200 150 U Fuel 2,470 1,960 510 U Maintenance 2,010 1,900 110 U Ground facility expenses 1,465 1,480 15 F Administration 3,265 3,340 75 F Total expense 22,070 21,280 790 U Net operating income $ 11,040 $ 10,920 $ 120 F

Explanation / Answer

Actual results Revenue and spending variance Flexible budget Activity variance Planning budget Lessons 145 145 140 Revenue 33110 240 U 33350 1150 F 32200 Expenses: Instructor wages 8510 190 F 8700 300 U 8400 Aircraft depreciation 4350 0 None 4350 150 U 4200 Fuel 2470 440 U 2030 70 U 1960 Maintenance 2010 60 U 1950 50 U 1900 Ground facility expenses 1465 25 F 1490 10 U 1480 Administration 3265 80 F 3345 5 U 3340 Total expense 22070 205 U 21865 585 U 21280 Net operating income 11040 445 U 11485 565 F 10920

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