Question

# The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two...

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.)

 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