Question

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

Answer 1