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 63 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 $ 2,960 Classroom supplies $ 300 Utilities $ 1,210 $ 90 Campus rent $ 5,000 Insurance $ 2,300 Administrative expenses $ 4,000 $ 43 $ 3 For example, administrative expenses should be $4,000 per month plus $43 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 63 students; however, it actually ran four courses with a total of only 53 students. The actual operating results for September appear below: Actual Revenue $ 53,170 Instructor wages $ 11,120 Classroom supplies $ 18,750 Utilities $ 1,980 Campus rent $ 5,000 Insurance $ 2,440 Administrative expenses $ 3,787 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 63 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 $ 2,960 Classroom supplies $ 300 Utilities $ 1,210 $ 90 Campus rent $ 5,000 Insurance $ 2,300 Administrative expenses $ 4,000 $ 43 $ 3 For example, administrative expenses should be $4,000 per month plus $43 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 63 students; however, it actually ran four courses with a total of only 53 students. The actual operating results for September appear below: Actual Revenue $ 53,170 Instructor wages $ 11,120 Classroom supplies $ 18,750 Utilities $ 1,980 Campus rent $ 5,000 Insurance $ 2,440 Administrative expenses $ 3,787 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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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 63 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 | $ | 2,960 | |||||
| Classroom supplies | $ | 300 | |||||
| Utilities | $ | 1,210 | $ | 90 | |||
| Campus rent | $ | 5,000 | |||||
| Insurance | $ | 2,300 | |||||
| Administrative expenses | $ | 4,000 | $ | 43 | $ | 3 | |
For example, administrative expenses should be $4,000 per month plus $43 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 63 students; however, it actually ran four courses with a total of only 53 students. The actual operating results for September appear below:
| Actual | ||
| Revenue | $ | 53,170 |
| Instructor wages | $ | 11,120 |
| Classroom supplies | $ | 18,750 |
| Utilities | $ | 1,980 |
| Campus rent | $ | 5,000 |
| Insurance | $ | 2,440 |
| Administrative expenses | $ | 3,787 |
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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