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 61 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 $ 2,920 Classroom supplies $ 280 Utilities $ 1,240 $ 80 Campus rent $ 5,100 Insurance $ 2,300 Administrative expenses $ 3,800 $ 44 $ 6

For example, administrative expenses should be $3,800 per month plus $44 per course plus $6 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 53 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,170
Instructor wages	$	10,960
Classroom supplies	$	16,930
Utilities	$	1,970
Campus rent	$	5,100
Insurance	$	2,440
Administrative expenses	$	3,768

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 SchoolFlexible Budget Performance ReportFor the Month Ended September 30Actual ResultsRevenue and Spending VariancesFlexible BudgetActivity VariancesPlanning BudgetCourses44Students5353Revenue$50,170$46,110Expenses:Instructor wages10,960Classroom supplies16,930Utilities1,970Campus rent5,100Insurance2,440Administrative expenses3,768Total expense41,168Net operating income$9,002

Answer 1

	Actual results	Revenue and spending variance		Flexible budget	Activity variances		Planning Budget
Courses	4			4			4
Students	53			53			61
Revenue	50170	4060	F	46110	6960	U	53070
Expenses:
Instructor wages	10960	720	F	11680	0	None	11680
Classroom supplies	16930	2090	U	14840	2240	F	17080
Utilities	1970	410	U	1560	0	None	1560
Campus rent	5100	0	None	5100	0	None	5100
Insurance	2440	140	U	2300	0	None	2300
Administrative expenses	3768	526	F	4294	48	F	4342
Total expense	41168	1394	U	39774	2288	F	42062
Net operating income	9002	2666	F	6336	4672	U	11008