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			$	2,950
Classroom supplies					$	290
Utilities	$	1,230	$	55
Campus rent	$	4,800
Insurance	$	2,000
Administrative expenses	$	3,700	$	45	$	7

For example, administrative expenses should be $3,700 per month plus $45 per course plus $7 per student. The company’s sales should average $850 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	$	50,650
Instructor wages	$	11,080
Classroom supplies	$	18,120
Utilities	$	1,860
Campus rent	$	4,800
Insurance	$	2,140
Administrative expenses	$	3,747

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	50650	1200	U	51850	1700	U	53550
Expenses:
Instructor wages	11080	720	F	11800	0	None	11800
Classroom supplies	18120	430	U	17690	580	F	18270
Utilities	1860	410	U	1450	0	None	1450
Campus rent	4800	0	None	4800	0	None	4800
Insurance	2140	140	U	2000	0	None	2000
Administrative expenses	3747	560	F	4307	14	F	4321
Total expense	41747	300	F	42047	594	F	42641
Net operating income	8903	900	U	9803	1106	U	10909