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 63 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			$	2,940
Classroom supplies					$	270
Utilities	$	1,230	$	55
Campus rent	$	4,800
Insurance	$	2,100
Administrative expenses	$	3,600	$	40	$	4

For example, administrative expenses should be $3,600 per month plus $40 per course plus $4 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 61 students. The actual operating results for September appear below:

	Actual
Revenue	$	51,910
Instructor wages	$	11,040
Classroom supplies	$	16,860
Utilities	$	1,860
Campus rent	$	4,800
Insurance	$	2,240
Administrative expenses	$	3,438

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	61			61			63
Revenue	51910	1160	U	53070	1740	U	54810
Expenses:
Instructor wages	11040	720	F	11760	0	None	11760
Classroom supplies	16860	390	U	16470	540	F	17010
Utilities	1860	410	U	1450	0	None	1450
Campus rent	4800	0	None	4800	0	None	4800
Insurance	2240	140	U	2100	0	None	2100
Administrative expenses	3438	566	F	4004	8	F	4012
Total expense	40238	346	F	40584	548	F	41132
Net operating income	11672	814	U	12486	1192	U	13678