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The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two...

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Accounting

The Gourmand Cooking School runs short cooking courses at itssmall campus. Management has identified two cost drivers it uses inits budgeting and performance reports—the number of courses and thetotal number of students. For example, the school might run twocourses in a month and have a total of 62 students enrolled inthose two courses. Data concerning the company’s cost formulasappear below:

Fixed Cost per MonthCost per CourseCost per
Student
Instructor wages$2,970
Classroom supplies$290
Utilities$1,200$75
Campus rent$4,800
Insurance$2,400
Administrative expenses$3,700$40$5

For example, administrative expenses should be $3,700 per monthplus $40 per course plus $5 per student. The company’s sales shouldaverage $880 per student.

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

Actual
Revenue$51,660
Instructor wages$11,160
Classroom supplies$17,830
Utilities$1,910
Campus rent$4,800
Insurance$2,540
Administrative expenses$3,596

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 forSeptember.

Answer & Explanation Solved by verified expert
4.4 Ratings (662 Votes)

Planning Budget
Particulars Planning Budget
Courses 4
Student 62
Revenue $54,560.00
Expenses:
Instructor Wages $11,880.00
Classroom Supplies $17,980.00
Utilities $1,500.00
Campus Rent $4,800.00
Insurance $2,400.00
Administrative Expenses $4,170.00
Tototal Expense $42,730.00
Net Operating Income $11,830.00
Flexible Budget
Particulars Flexible Budget
Courses 4
Student 52
Revenue $45,760.00
Expenses:
Instructor Wages $11,880.00
Classroom Supplies $15,080.00
Utilities $1,500.00
Campus Rent $4,800.00
Insurance $2,400.00
Administrative Expenses $4,120.00
Tototal Expense $39,780.00
Net Operating Income $5,980.00
Particulars Actual Revenue and spending variances Flexible Budget
Courses 4 4
Student 52 52
Revenue $51,660.00 $5,900.00 F $45,760.00
Expenses:
Instructor Wages $11,160.00 $720.00 F $11,880.00
Classroom Supplies $17,830.00 $2,750.00 U $15,080.00
Utilities $1,910.00 $410.00 U $1,500.00
Campus Rent $4,800.00 $0.00 None $4,800.00
Insurance $2,540.00 $140.00 U $2,400.00
Administrative Expenses $3,596.00 $524.00 F $4,120.00
Tototal Expense $41,836.00 $2,056.00 U $39,780.00
Net Operating Income $9,824.00 $3,844.00 F $5,980.00

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