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 Planning Actual Results 155 Budget Variances Lessons 150 $ 33.900 S 33,000 S 900 F Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration 120 U 190 U 500 U 120 U 10 F 70 F 850 U $ 8,080 8,030 50 F 9,870 5,890 2,750 2,450 1,540 3,320 25,820 9,750 5,700 2,250 2,330 1,550 3,390 24,970 Total expense Net operating income 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:

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Lessons 155 155 150 Revenue 33900 200 U 34100 1100 F 33000 Expenses: Instructor wages 9870 205 F 10075 325 U 9750 Aircraft depreciation 5890 0 None 5890 190 U 5700 Fuel 2750 425 U 2325 75 U 2250 Maintenance 2450 60 U 2390 60 U 2330 Ground facility expenses 1540 20 F 1560 10 U 1550 Administration 3320 75 F 3395 5 U 3390 Toatl Expense 25820 185 U 25635 665 U 24970 Net operating income 8080 385 U 8465 435 F 8030

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