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 $ 2,970 Classroom supplies $ 270 Utilities $ 1,220 $ 60 Campus rent $ 5,100 Insurance $ 2,100 Administrative expenses $ 3,900 $ 41 $ 3 For example, administrative expenses should be $3,900 per month plus $41 per course plus $3 per student. The company’s sales should average $890 per student. The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September were as follows: Actual Revenue $ 54,060 Instructor wages $ 11,160 Classroom supplies $ 17,130 Utilities $ 1,870 Campus rent $ 5,100 Insurance $ 2,240 Administrative expenses $ 3,682 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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			$	2,970
Classroom supplies					$	270
Utilities	$	1,220	$	60
Campus rent	$	5,100
Insurance	$	2,100
Administrative expenses	$	3,900	$	41	$	3

For example, administrative expenses should be $3,900 per month plus $41 per course plus $3 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September were as follows:

	Actual
Revenue	$	54,060
Instructor wages	$	11,160
Classroom supplies	$	17,130
Utilities	$	1,870
Campus rent	$	5,100
Insurance	$	2,240
Administrative expenses	$	3,682

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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