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 62 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 $ 280 Utilities $ 1,210 $ 60 Campus rent $ 4,800 Insurance $ 2,300 Administrative expenses $ 3,900 $ 45 $ 4 For example, administrative expenses should be $3,900 per month plus $45 per course plus $4 per student. The company’s sales should average $870 per student. The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September were as follows: Actual Revenue $ 51,040 Instructor wages $ 10,960 Classroom supplies $ 17,210 Utilities $ 1,860 Campus rent $ 4,800 Insurance $ 2,440 Administrative expenses $ 3,754 Required: Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (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.)

The Gourmand Cooking School

Flexible Budget Performance Report:

                                              Actual     Flexible             Variances

                                             Budget    Budget        Spending   Activity                              

Instructor wages              $ 10,960      $11,680       $720                         F

Classroom supplies             17,210        15,120                          $2,090  U

Utilities                                  1,860          1,450        $410                          U

Campus rent                        4,800         4,800        $0                           None

Insurance                             2,440         2,300        $140                          U

Administrative expenses    3,754         4,296                            $542      F

Total cost                        $ 41,024    $39,646        $170           $1,548    U    

Sales Revenue                $51,040    $46,980                  $4,060             F

Explanation:

a) Data and Calculations:

Budget:

                                          Fixed Cost        Cost              Cost            Total

                                          per Month    per Course   per Student

Instructor wages                                       $ 2,920                           $ 11,680

Classroom supplies                                                           $ 280        17,360

Utilities                                $ 1,210             $ 60                                   1,450

Campus rent                     $ 4,800                                                       4,800

Insurance                          $ 2,300                                                       2,300

Administrative expenses $ 3,900            $ 45                $ 4              4,328

Total cost                                                                                           $41,918

Sales Revenue                                                              $ 870         $53,940

Flexing the Budget:

Instructor wages                   $ 11,680/4 * 4 = $11,680

Classroom supplies              $280 * 54 =      $15,120

Utilities                                 1,450

Campus rent                     $ 4,800

Insurance                          $ 2,300

Administrative expenses $ 3,900 + $ 180 + $ 216  = $4,296

Sales revenue ($870 * 54) = $46,980  

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