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 64 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 $ 300 Utilities $ 1,250 $ 55 Campus rent $ 4,900 Insurance $ 2,200 Administrative expenses $ 3,700 $ 42 $ 6 For example, administrative expenses should be $3,700 per month plus $42 per course plus $6 per student. The company’s sales should average $850 per student. The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 62 students. The actual operating results for September appear below: Actual Revenue $ 51,500 Instructor wages $ 10,960 Classroom supplies $ 19,050 Utilities $ 1,880 Campus rent $ 4,900 Insurance $ 2,340 Administrative expenses $ 3,678 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 for September.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.1.1P: Budget performance report for a cost center Sneed Industries Company sells vehicle parts to...

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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 64 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			$ 300
Utilities	$ 1,250	$ 55
Campus rent	$ 4,900
Insurance	$ 2,200
Administrative expenses	$ 3,700	$ 42	$ 6

For example, administrative expenses should be $3,700 per month plus $42 per course plus $6 per student. The company’s sales should average $850 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 62 students. The actual operating results for September appear below:

	Actual
Revenue	$ 51,500
Instructor wages	$ 10,960
Classroom supplies	$ 19,050
Utilities	$ 1,880
Campus rent	$ 4,900
Insurance	$ 2,340
Administrative expenses	$ 3,678

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 for September.

Required 1
Required 2 Required 3
Prepare the company's flexible budget for September.
Gourmand Cooking School
Flexible Budget
For the Month Ended September 30
Revenue
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Total expense
Net operating income
$
0
0

Courses
Students
Revenue
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Gourmand Cooking School
Revenue and Spending Variances
For the Month Ended September 30
Administrative expenses
Total expense
Net operating income
Actual
Results
$
4
62
$ 51,500
10,960
19,050
1,880
4,900
2,340
3,678
42,808
8,692
Revenue and Spending
Variances
Flexible
Budget

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