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 62 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 $ 270 Utilities $ 1,250 $ 55 Campus rent $ 5,000 Insurance $ 2,200 Administrative expenses $ 3,900 $ 42 $ 5 For example, administrative expenses should be $3,900 per month plus $42 per course plus $5 per student. The company’s sales should average $860 per student. The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 52 students. The actual operating results for September appear below: Actual Revenue $ 50,420 Instructor wages $ 11,120 Classroom supplies $ 16,590 Utilities $ 1,880 Campus rent $ 5,000 Insurance $ 2,340 Administrative expenses $ 3,804 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 62 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					$	270
Utilities	$	1,250	$	55
Campus rent	$	5,000
Insurance	$	2,200
Administrative expenses	$	3,900	$	42	$	5

For example, administrative expenses should be $3,900 per month plus $42 per course plus $5 per student. The company’s sales should average $860 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 52 students. The actual operating results for September appear below:

	Actual
Revenue	$	50,420
Instructor wages	$	11,120
Classroom supplies	$	16,590
Utilities	$	1,880
Campus rent	$	5,000
Insurance	$	2,340
Administrative expenses	$	3,804

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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