he 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 $ 2,930 Classroom supplies $ 290 Utilities $ 1,200 $ 85 Campus rent $ 4,900 Insurance $ 2,300 Administrative expenses $ 3,800 $ 41 $ 6 For example, administrative expenses should be $3,800 per month plus $41 per course plus $6 per student. The company’s sales should average $890 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 57 students. The actual operating results for September appear below: Actual Revenue $ 51,390 Instructor wages $ 11,000 Classroom supplies $ 17,540 Utilities $ 1,950 Campus rent $ 4,900 Insurance $ 2,440 Administrative expenses $ 3,756 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.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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 | $ | 2,930 | |||||
| Classroom supplies | $ | 290 | |||||
| Utilities | $ | 1,200 | $ | 85 | |||
| Campus rent | $ | 4,900 | |||||
| Insurance | $ | 2,300 | |||||
| Administrative expenses | $ | 3,800 | $ | 41 | $ | 6 | |
For example, administrative expenses should be $3,800 per month plus $41 per course plus $6 per student. The company’s sales should average $890 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 57 students. The actual operating results for September appear below:
| Actual | ||
| Revenue | $ | 51,390 |
| Instructor wages | $ | 11,000 |
| Classroom supplies | $ | 17,540 |
| Utilities | $ | 1,950 |
| Campus rent | $ | 4,900 |
| Insurance | $ | 2,440 |
| Administrative expenses | $ | 3,756 |
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.)
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