Wednesday, 1 April 2015

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 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

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 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     $ 2,940      
  Classroom supplies          $ 260   
  Utilities $ 1,210    $ 80      
  Campus rent $ 4,800           
  Insurance $ 2,300             
  Administrative expenses $ 4,000    $ 43   $ 5   

 
For example, administrative expenses should be $4,000 per month plus $43 per course plus $5 per student. The company’s sales should average $890 per student.
 
    The actual operating results for September appear below:
 

    Actual
  Revenue $ 52,280  
  Instructor wages $ 11,040  
  Classroom supplies $ 15,970  
  Utilities $ 1,940  
  Campus rent $ 4,800  
  Insurance $ 2,440  
  Administrative expenses $ 3,908  

 
Required:
1.
The Gourmand Cooking School expects to run four courses with a total of 62 students in September. Complete the company’s planning budget for this level of activity.

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2.
The school actually ran four courses with a total of 60 students in September. Complete the company’s flexible budget for this level of activity.
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3. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for September.

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Explanation: