Question

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 60 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month		Cost per Course		Cost per Student
Instructor wages			$	2,910
Classroom supplies					$	300
Utilities	$	1,210	$	60
Campus rent	$	4,900
Insurance	$	2,000
Administrative expenses	$	4,000	$	45	$	4

For example, administrative expenses should be $4,000 per month plus $45 per course plus $4 per student. The company’s sales should average $860 per student.

The company planned to run four courses with a total of 60 students; however, it actually ran four courses with a total of only 52 students. The actual operating results for September appear below:

	Actual
Revenue	$	48,700
Instructor wages	$	10,920
Classroom supplies	$	17,850
Utilities	$	1,860
Campus rent	$	4,900
Insurance	$	2,140
Administrative expenses	$	3,846

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (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.)

Answer 1

	Actual results	Revenue and spending variance		Flexible budget	Activity variances		Planning Budget
Courses	4			4			4
Students	52			52			60
Revenue	48700	3980	F	44720	6880	U	51600
Expenses:
Instructor wages	10920	720	F	11640	0	None	11640
Classroom supplies	17850	2250	U	15600	2400	F	18000
Utilities	1860	410	U	1450	0	None	1450
Campus rent	4900	0	None	4900	0	None	4900
Insurance	2140	140	U	2000	0	None	2000
Administrative expenses	3846	542	F	4388	32	F	4420
Total expense	41516	1538	U	39978	2432	F	42410
Net operating income	7184	2442	F	4742	4448	U	9190