Question

# The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two...

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 Classroom supplies \$ 280 Utilities \$ 1,210 \$ 60 Campus rent \$ 4,700 Insurance \$ 2,400 Administrative expenses \$ 3,900 \$ 46 \$ 6

For example, administrative expenses should be \$3,900 per month plus \$46 per course plus \$6 per student. The company’s sales should average \$880 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 61 students. The actual operating results for September appear below:

 Actual Revenue \$ 54,300 Instructor wages \$ 10,880 Classroom supplies \$ 18,050 Utilities \$ 1,860 Campus rent \$ 4,700 Insurance \$ 2,540 Administrative expenses \$ 3,900

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.

1) Planning budget :

 Revenue 57200 Instructor wages 11600 Classroom supplies 18200 Utilities 1450 Campus rent 4700 Insurance 2400 Administrative expenses 4474 Total expense 42824 Net operating income 14376

Flexible budget :

 Revenue 53680 Instructor wages 11600 Classroom supplies 17080 Utilities 1450 Campus rent 4700 Insurance 2400 Administrative expenses 4450 Total expense 41680 Net operating income 12000

3. Calculate the revenue and spending variances for September.

 Revenue 620 F Instructor wages 720 F Classroom supplies 970 U Utilities 410 U Campus rent 0 None Insurance 140 U Administrative expense 550 F Total expense 250 U Net operating income 370 F

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