5 Wings Flight School offers flying lessons at a small municipal airport. The sc

Question

5

Wings 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:

  

Wings Flight School
Variance Report
For the Month Ended August 31

Planning
Budget

Actual
Results

Variances

  Lessons

240     

250    

  Revenue

$

51,600     

$

53,900    

$

2,300   

F

  Expenses:

     Instructor wages

14,640     

15,150    

510   

U

     Aircraft depreciation

12,240     

12,750    

510   

U

     Fuel

4,800     

5,750    

950   

U

     Maintenance

3,770     

3,970    

200   

U

     Ground facility expenses

2,810     

2,720    

90   

F

     Administration

4,440     

4,370    

70   

F

  Total expense

42,700     

44,710    

2,010   

U

  Net operating income

$

8,900     

$

9,190    

$

290   

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 August, but the report shows an unfavorable variance.

  

The planning budget was developed using the following formulas, where q is the number of lessons sold:

  

  Revenue

$215q  

  Instructor wages

$61q  

  Aircraft depreciation

$51q  

  Fuel

$20q  

  Maintenance

$ 650 + $13q  

  Ground facility expenses

$1,610 + $5q  

  Administration

   $4,200 + $1q  

  

Required:

Complete the flexible budget performance report for the school for August. (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.)

Wings Flight School

Flexible Budget Performance Report

For the Month Ended August 31

Activity Variances

Revenue and Spending Variances

Revenue

Expenses:

Instructor wages

Aircraft depreciation

Fuel

Maintenance

Ground facility expenses

Administration

Total expense

Net operating income

Wings 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:

Explanation / Answer

Flexible Budget Performance Report

Planned Actual Activity Variances Standard Actual Revenue and Spending Variances Revenue 51600 53900 53750 53900 150 F Less: Expenses: Instructor wages 14640 15150 510 U 15250 15150 100 F Aircraft depreciation 12240 12750 510 U 12750 12750 - Fuel 4800 5750 950 U 5000 5750 750 U Maintenance 3770 3970 200 U 3900 3970 70 U Ground facility expenses 2810 2720 90 F 2860 2720 140 F Administration 4440 4370 70 F 4450 4370 80 F Total Expense 42700 44710 2010 U 44210 44710 500 U Net Income 8900 9190 290 F 9540 9190 350 U

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