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 62 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 | $ | 2,970 | |||||

Classroom supplies | $ | 300 | |||||

Utilities | $ | 1,240 | $ | 65 | |||

Campus rent | $ | 4,600 | |||||

Insurance | $ | 2,300 | |||||

Administrative expenses | $ | 3,500 | $ | 43 | $ | 4 | |

For example, administrative expenses should be $3,500 per month plus $43 per course plus $4 per student. The company’s sales should average $860 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 52 students. The actual operating results for September appear below:

Actual | ||

Revenue | $ | 50,420 |

Instructor wages | $ | 11,160 |

Classroom supplies | $ | 18,450 |

Utilities | $ | 1,910 |

Campus rent | $ | 4,600 |

Insurance | $ | 2,440 |

Administrative expenses | $ | 3,346 |

**Required:**

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Answer #1

1.

Gourmand Cooking School | |

Planning Budget | |

For the Month Ended September 30 | |

Revenue ($860 x 62) | 53320 |

Expenses: | |

Instructor wages ($2970 x 4) | 11880 |

Classroom supplies ($300 x 62) | 18600 |

Utilities [$1240 + ($65 x 4)] | 1500 |

Campus rent | 4600 |

Insurance | 2300 |

Administrative expenses [$3500+($43 x 4)+($4 x 62)] | 3920 |

Total expense | 42800 |

Net operating income | 10520 |

2.

Gourmand Cooking School | |

Flexible Budget | |

For the Month Ended September 30 | |

Revenue ($860 x 52) | 44720 |

Expenses: | |

Instructor wages ($2970 x 4) | 11880 |

Classroom supplies ($300 x 52) | 15600 |

Utilities [$1240 + ($65 x 4)] | 1500 |

Campus rent | 4600 |

Insurance | 2300 |

Administrative expenses [$3500+($43 x 4)+($4 x 52)] | 3880 |

Total expense | 39760 |

Net operating income | 4960 |

3.

Gourmand Cooking School | ||||

Flexible Budget Performance Report | ||||

For the Month Ended September 30 | ||||

Actual Results | Revenue and Spending Variances | Flexible Budget | ||

Revenue | 50420 | 5700 | F | 44720 |

Expenses: | ||||

Instructor wages | 11160 | 720 | F | 11880 |

Classroom supplies | 18450 | 2850 | U | 15600 |

Utilities | 1910 | 410 | U | 1500 |

Campus rent | 4600 | 0 | None | 4600 |

Insurance | 2440 | 140 | U | 2300 |

Administrative expenses | 3346 | 534 | F | 3880 |

Total expense | 41906 | 2146 | U | 39760 |

Net operating income | 8514 | 3554 | F | 4960 |

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 $ 2,970...

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 65 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
$
2,900...

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
$
2,950...

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...

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
$
2,980...

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 64 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
$
2,900...

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 60 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
$
2,910...

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...

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
$
2,950...

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 64 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
$
2,910...

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