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 $ 2,920 Classroom supplies $ 290 Utilities $ 1,220 $ 65 Campus rent $ 5,000 Insurance $ 2,200 Administrative expenses $ 3,800 $ 43 $ 5 For example, administrative expenses should be $3,800 per month plus $43 per course plus $5 per student. The company’s sales should average $880 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 55 students. The actual operating results for September were as follows: Actual Revenue $ 52,540 Instructor wages $ 10,960 Classroom supplies $ 18,120 Utilities $ 1,890 Campus rent $ 5,000 Insurance $ 2,340 Administrative expenses $ 3,713 Required: Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 1PB

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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		$ 2,920
Classroom supplies			$ 290
Utilities	$ 1,220	$ 65
Campus rent	$ 5,000
Insurance	$ 2,200
Administrative expenses	$ 3,800	$ 43	$ 5

For example, administrative expenses should be $3,800 per month plus $43 per course plus $5 per student. The company’s sales should average $880 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 55 students. The actual operating results for September were as follows:

	Actual
Revenue	$ 52,540
Instructor wages	$ 10,960
Classroom supplies	$ 18,120
Utilities	$ 1,890
Campus rent	$ 5,000
Insurance	$ 2,340
Administrative expenses	$ 3,713

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September.

Courses
Students
Revenue
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Total expense
Net operating income
Gourmand Cooking School
Flexible Budget Performance Report
For the Month Ended September 30
Actual Results
$
Revenue and
Spending Variances
4
55
52,540 $4,140 F
10,960
18,120
1,890
5,000
2,340
3,713
42,023
10,517
720 F
U
410 U
0 None
140 U
IF
U
F
Flexible
Budget
Activity Variances
Planning
Budget

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