TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: TipTop Flight School Variance Report For the Month Ended July 31 Actual Results Planning Budget Variances Lessons 175 170 Revenue $ 38,350 $ 37,400 $ 950 F Expenses: Instructor wages 9,500 9,350 150 U Aircraft depreciation 6,650 6,460 190 U Fuel 3,270 2,720 550 U Maintenance 2,390 2,240 150 U Ground facility expenses 1,875 1,910 35 F Administration 3,525 3,620 95 F Total expense 27,210 26,300 910 U Net operating income $ 11,140 $ 11,100 $ 40 F After several months of using these reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance. The planning budget was developed using the following formulas, where q is the number of lessons sold: Cost Formulas Revenue $220q Instructor wages $55q Aircraft depreciation $38q Fuel $16q Maintenance $540 + $10q Ground facility expenses $1,400 + $3q Administration $3,280 + $2q Required: 2. Complete the flexible budget performance report for the school for July. (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.
TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below:
| TipTop Flight School Variance Report For the Month Ended July 31 |
||||
| Actual Results | Planning |
Variances | ||
|---|---|---|---|---|
| Lessons | 175 | 170 | ||
| Revenue | $ 38,350 | $ 37,400 | $ 950 | F |
| Expenses: | ||||
| Instructor wages | 9,500 | 9,350 | 150 | U |
| Aircraft |
6,650 | 6,460 | 190 | U |
| Fuel | 3,270 | 2,720 | 550 | U |
| Maintenance | 2,390 | 2,240 | 150 | U |
| Ground facility expenses | 1,875 | 1,910 | 35 | F |
| Administration | 3,525 | 3,620 | 95 | F |
| Total expense | 27,210 | 26,300 | 910 | U |
| Net operating income | $ 11,140 | $ 11,100 | $ 40 | F |
After several months of using these reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.
The planning budget was developed using the following formulas, where q is the number of lessons sold:
| Cost Formulas | |
|---|---|
| Revenue | $220q |
| Instructor wages | $55q |
| Aircraft depreciation | $38q |
| Fuel | $16q |
| Maintenance | $540 + $10q |
| Ground facility expenses | $1,400 + $3q |
| Administration | $3,280 + $2q |
Required:
2. Complete the flexible budget performance report for the school for July. (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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