Question

Problem 9-22 Critique a Report; Prepare a Performance Report [LO9-1, LO9-2, LO9-3, LO9-4, LO9-6]

TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below:

TipTop Flight School Variance Report For the Month Ended July 31
	Actual Results			Planning Budget			Variances
Lessons		200			195
Revenue	$	49,810		$	48,750		$	1,060	F
Expenses:
Instructor wages		13,815			13,650			165	U
Aircraft depreciation		8,000			7,800			200	U
Fuel		3,780			3,120			660	U
Maintenance		3,350			3,185			165	U
Ground facility expenses		2,250			2,340			90	F
Administration		3,575			3,695			120	F
Total expense		34,770			33,790			980	U
Net operating income	$	15,040		$	14,960		$	80	F

After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.

The planning budget was developed using the following formulas, where q is the number of lessons sold:

	Cost Formulas
Revenue	$250q
Instructor wages	$70q
Aircraft depreciation	$40q
Fuel	$16q
Maintenance	$650 + $13q
Ground facility expenses	$1,950 + $2q
Administration	$3,500 + $1q

  
Required:

2. Complete the flexible budget performance report for the school for July. (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

Fiexible Budget Performance Report :-

Particulars	Planning Budget	Activity Variances	Flexible Budget	Revenue and Spending Variances	Actual Results
Lessons(q)	195		200		200
Revenue($250q) (A)	48750	1250 F	50000	190 U	49810
Expenses:-
Instructor Wages(70q)	13650	350 U	14000	185 F	13815
Aircraft Depreciation(40q)	7800	200 U	8000	0	8000
Fuel (16q)	3120	80 U	3200	580 U	3780
Maintenance($650+13q)	3185	65 U	3250	100 U	3350
Ground Facility Exp.($1950+2q)	2340	10 U	2350	100 U	2250
Administration($3500+1q)	3695	5 U	3700	125 F	3575
Total Expense (B)	(33790)	710 U	(34500)	470 U	(34770)
Net Operating Income (A-B)	14960	540 F	15500	660 U	15040