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 175 170 Revenue $ 38,350 $ 37,400 $ 950 F Expenses: Instructor wages 9,500 9,350 150 U Aircraft depreciation 6,650 6,460 190 U Fuel 3,270 2,720 550 U Maintenance 2,390 2,240 150 U Ground facility expenses 1,875 1,910 35 F Administration 3,525 3,620 95 F Total expense 27,210 26,300 910 U Net operating income $ 11,140 $ 11,100 $ 40 F TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Results Flexible Budget Planning Budget Lessons 175 170 Revenue S 38,350 S 37,400 Expenses Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration S 9,500 6,650 3,270 2,390 1,875 3,525 27,210 S 11,140 9,350 6,460 2,720 2,240 1,910 3,620 26,300 S 11,100 Total expense Net operating income

Explanation / Answer

Flexible budget performance report :

Actual results Revenue and spending variance Flexibld budget Activity variance Static budget Lessones 175 175 170 Revenue 38350 150 U 38500 1100 F 37400 Expenses Instructor wages 9500 125 F 9625 275 U 9350 Aircraft depreciation 6650 None 6650 190 U 6460 Fuel 3270 470 U 2800 80 U 2720 Maintenance 2390 100 U 2290 50 U 2240 Ground facilitiy expense 1875 50 F 1925 15 U 1910 Administration 3525 105 F 3630 10 U 3620 Total expenses 27210 290 U 26920 620 U 26300 Net operating income 11140 440 U 11580 480 F 11100

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