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 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
Classroom supplies					$	310
Utilities	$	1,200	$	75
Campus rent	$	4,600
Insurance	$	2,100
Administrative expenses	$	4,000	$	41	$	4

For example, administrative expenses should be $4,000 per month plus $41 per course plus $4 per student. The company’s sales should average $870 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 51 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,170
Instructor wages	$	11,080
Classroom supplies	$	18,760
Utilities	$	1,910
Campus rent	$	4,600
Insurance	$	2,240
Administrative expenses	$	3,834

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 results	Revenue and spending variance		Flexible budget	Activity variances		Planning Budget
Courses	4			4			4
Students	51			51			61
Revenue	50170	5800	F	44370	8700	U	53070
Expenses:
Instructor wages	11080	720	F	11800	0	None	11800
Classroom supplies	18760	2950	U	15810	3100	F	18910
Utilities	1910	410	U	1500	0	None	1500
Campus rent	4600	0	None	4600	0	None	4600
Insurance	2240	140	U	2100	0	None	2100
Administrative expenses	3834	534	F	4368	40	F	4408
Total expense	42424	2246	U	40178	3140	F	43318
Net operating income	7746	3554	F	4192	5560	U	9752