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					$	290
Utilities	$	1,220	$	70
Campus rent	$	4,600
Insurance	$	2,400
Administrative expenses	$	3,800	$	41	$	6

For example, administrative expenses should be $3,800 per month plus $41 per course plus $6 per student. The company’s sales should average $900 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 53 students. The actual operating results for September appear below:

	Actual
Revenue	$	53,800
Instructor wages	$	11,040
Classroom supplies	$	18,120
Utilities	$	1,910
Campus rent	$	4,600
Insurance	$	2,540
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.)

Answer 1

	Actual	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Courses	4			4			4
Students	53			53			63
Revenue	53800	6100	F	47700	9000	U	56700
Expenses:
Instructor wages	11040	720	F	11760	0	None	11760
Classroom supplies	18120	2750	U	15370	2900	F	18270
Utilities	1910	410	U	1500	0	None	1500
Campus rent	4600	0	None	4600	0	None	4600
Insurance	2540	140	U	2400	0	None	2400
Administrative expenses	3768	514	F	4282	60	F	4342
Total expenses	41978	2066	U	39912	2960	F	42872
Net operating income	11822	4034	F	7788	6040	U	13828