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			$	2,980
Classroom supplies					$	270
Utilities	$	1,200	$	80
Campus rent	$	5,000
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 $890 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 57 students. The actual operating results for September appear below:

	Actual
Revenue	$	53,170
Instructor wages	$	11,200
Classroom supplies	$	16,860
Utilities	$	1,930
Campus rent	$	5,000
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.)

Gourmand Cooking School
Flexible Budget Performance Report
For the Month Ended September 30
	Actual Results			Flexible Budget			Planning Budget
Courses	4
Students	57
Revenue	$53,170
Expenses:
Instructor wages	11,200
Classroom supplies	16,860
Utilities	1,930
Campus rent	5,000
Insurance	2,240
Administrative expenses	3,438
Total expense	40,668
Net operating income	$12,502

Answer 1

	Actual results	Revenue and spending variance		Flexible budget	Activity variances		Planning Budget
Courses	4			4			4
Students	57			57			63
Revenue	53170	2440	F	50730	5340	U	56070
Expenses:
Instructor wages	11200	720	F	11920	0	None	11920
Classroom supplies	16860	1470	U	15390	1620	F	17010
Utilities	1930	410	U	1520	0	None	1520
Campus rent	5000	0	None	5000	0	None	5000
Insurance	2240	140	U	2100	0	None	2100
Administrative expenses	3438	550	F	3988	24	F	4012
Total expense	40668	750	U	39918	1644	F	41562
Net operating income	12502	1690	F	10812	3696	U	14508