Problem:
The Toque cooking academy runs short cooking courses at its small campus. Management has identified two costs 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 four courses in a month and have a total of 60 students enrolled in those four courses. Data concerning the company's cost formulas appear below:
Fixed cost Cost Per Cost per
Per month course student
Instructor wages................ $2,980
Classroom supplies.......... $310
utilities.............................. $1,230 $85
campus rent..................... $5,100
insurance......................... $2,340
Administrative expenses... $3,940 $46 $7
For example administrative expenses should be $3.940 per month plus $46 per course plus $7 per student. The company's sales should average $850 per student. The actual results for October appear below:
Actual
Revenue..........................................$48,100
Instructor wages..............................$11,200
Classroom supplies.........................$18,450
utilities..............................................$1,980
campus rent.....................................$5,100
Insurance.........................................$2,480
Administrative expenses.....................$3,970
Required to do:
Question 1: The toque cooking academy expects to run four courses with a total of 60 students in October. Prepare the company's planning budget for this level of activity.
Question 2. The school actually ran four courses with a total of 58 students in October. Prepare the company's flexible budget for this level of activity.
Question 3. Prepare a flexible budget performance report that shows both activity variances and revenue and spending variances for October.