Question

TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager...

 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 195      190
Revenue \$ 40,830      \$ 39,900     \$ 930    F
Expenses:
Instructor wages 12,540      12,350     190    U
Aircraft depreciation 7,215      7,030     185    U
Fuel 4,280      3,800     480    U
Maintenance 3,250      3,140     110    U
Ground facility expenses 2,105      2,190     85    F
Administration 4,305      4,370     65    F
Total expense 33,695      32,880     815    U
Net operating income \$ 7,135      \$ 7,020     \$ 115    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 \$210q Instructor wages \$65q Aircraft depreciation \$37q Fuel \$20q Maintenance \$ 670 + \$13q Ground facility expenses \$1,620 + \$3q Administration \$4,180 + \$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).)

 TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Results Revenue and Spending Variances Flexible Budget Activity Variances Lessons Revenue Expenses: Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income

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