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TipTop Flight School offers flying lessons at a small municipal alrport. The school's owner and manager has been attempting to evaluate performance and control costs using a varlance report that compares the planning budget to actual results. A recent varlance report appears below: TipTop Flight School Variance Report For the Month Ended July 31 Actual Results 225 Planning Budget 220 Variances Lessons $ 60,400 $ 59,400 $1,eee F Revenue Expenses : Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Total expense Net operating income 17,800 17,600 200 u 7,650 7,480 170 U 4,340 3,740 600 U 3,650 3,450 200 u 2,478 2,530 60 F 3,960 4,040 88 F 39,870 38,840 1,030 U $ 20,530 $ 20,560 $ 30 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 g is the number of lessons sold: Revenue Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses Administration Cost Formulas $270g $809 $349 $179 $590 + $139 $1,650 + $49 $3,389 + $39 TipTop Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Results 225 Flexible Budget Planning Budget 220 Lessons Revenue $ 60,400 $ 59,400 Expenses: Instructor wages 17.800 17,600 Aircraft depreciation 7.650 7.480 Fuel 4.340 3,740 3,650 3,450 Maintenance Ground facility expenses 2,470 2,530 Administration 4,040 3,960 39,870 Total expense 38,840 Net operating income $ 20,530 $ 20,560

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