The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and thetotal number of students. For example, the school might run two courses in a month and have a total of 50students enrolled in those two courses. Data concerning the company’s cost formulas appear below:Fixed Cost Cost per Cost perper Month Course StudentInstructor wages .................. $3,080Classroom supplies ............. $260Utilities ................................. $870 $130Campus rent ........................ $4,200Insurance ............................. $1,890Administrative expenses ...... $3,270 $15 $4For example, administrative expenses should be $3,270 per month plus $15 per course plus $4 per student.The company’s sales should average $800 per student.The actual operating results for September appear below:ActualRevenue ......................................... $32,400Instructor wages ............................. $9,080Classroom supplies ....................... $8,540Utilities ............................................ $1,530Campus rent ................................... $4,200Insurance ........................................ $1,890Administrative expenses ................. $3,790Required:1. The Gourmand Cooking School expects to run three courses with a total of 45 students in September.Prepare the company’s planning budget for this level of activity.2. The school actually ran three courses with a total of 42 students in September. Prepare the company’sflexible budget for this level of activity.3. Prepare a flexible budget performance report that shows both activity variances and revenue andspending variances for September.
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.
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that 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 50
students enrolled in those two courses. Data concerning the company’s cost formulas appear below:
Fixed Cost Cost per Cost per
per Month Course Student
Instructor wages .................. $3,080
Classroom supplies ............. $260
Utilities ................................. $870 $130
Campus rent ........................ $4,200
Insurance ............................. $1,890
Administrative expenses ...... $3,270 $15 $4
For example, administrative expenses should be $3,270 per month plus $15 per course plus $4 per student.
The company’s sales should average $800 per student.
The actual operating results for September appear below:
Actual
Revenue ......................................... $32,400
Instructor wages ............................. $9,080
Classroom supplies ....................... $8,540
Utilities ............................................ $1,530
Campus rent ................................... $4,200
Insurance ........................................ $1,890
Administrative expenses ................. $3,790
Required:
1. The Gourmand Cooking School expects to run three courses with a total of 45 students in September.
Prepare the company’s planning budget for this level of activity.
2. The school actually ran three courses with a total of 42 students in September. Prepare the company’s
flexible budget for this level of activity.
3. Prepare a flexible budget performance report that shows both activity variances and revenue and
spending variances for September.
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