Question

Dundy Cooking School bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:

	Fixed Element per month	Variable element per student	Variable Element per course
revenue	$0	$354	$0
faculty wages	$0	$0	$2,300
course supplies	$0	$48	$40
Administrative Expenses	$41,700	$13	$21

In October, the school budgeted for 1,400 students and 127 courses. The actual activity for the month was 1,500 students and 129 courses.

Required:

Prepare a report showing the school's activity variances for October. Label each variance as favorable (F) or unfavorable (U).

Answer 1

Dundy Cooking School
Activity Variance Report for October
	Flexible Budget	Activity Variances		Planning Budget
Number of Students	1500			1400
Number of Courses	129			127
Revenue	531000	35400	F	495600
Faculty wages	296700	4600	U	292100
Course supplies	77160	4880	U	72280
Administrative expenses	63909	1342	U	62567
Total expense	437769	10822	U	426947
Net operating income	93231	24578	F	68653

Working:

	Flexible Budget	Planning Budget
Revenue	1500 x $354 = $531000	1400 x $354 = $495600
Faculty wages	129 x $2300 = $296700	127 x $2300 = $292100
Course supplies	(1500 x $48) + (129 x $40) = $77160	(1400 x $48) + (127 x $40) = $72280
Administrative expenses	$41700 + (1500 x $13) + (129 x $21) = $63909	$41700 + (1400 x $13) + (127 x $21) = $62567