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: Instructor wages Classroon supplies Utilities Campus rent Insurance Administrative expenses Fixed Cost per Month Revenue Instructor wages Classroom supplies Utilities $ 1,230 $4,800 $ 2,300 $3,000 Campus rent Insurance Administrative expenses $ 45 For example, administrative expenses should be $3,800 per month plus $45 per course plus $5 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 58 students. The actual operating results for September appear below: Cost per Course $ 2,970 $ 60 Actual $ 54,060 Cost per Student $300 $ 11,160 $ 19,050 $1,800 $ 4,000 $ 2,440 $ 3,726 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.
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: Instructor wages Classroon supplies Utilities Campus rent Insurance Administrative expenses Fixed Cost per Month Revenue Instructor wages Classroom supplies Utilities $ 1,230 $4,800 $ 2,300 $3,000 Campus rent Insurance Administrative expenses $ 45 For example, administrative expenses should be $3,800 per month plus $45 per course plus $5 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 58 students. The actual operating results for September appear below: Cost per Course $ 2,970 $ 60 Actual $ 54,060 Cost per Student $300 $ 11,160 $ 19,050 $1,800 $ 4,000 $ 2,440 $ 3,726 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text: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:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Fixed Cost
per Month
$ 1,230
$ 4,800
$ 2,300
$ 3,800
Revenue
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Cost per
Course
$ 2,970
$60
$ 45
For example, administrative expenses should be $3,800 per month plus $45 per course plus $5 per student. The company's sales
should average $890 per student.
Cost per
Student
$ 300
Actual
$ 54,060
$ 11,160
$ 19,050
$ 1,880
$ 4,800
$ 2,440
$ 3,726
$5
The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 58
students. The actual operating results for September appear below:
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.
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