Exercise 9-12 Working with More Than One Cost Driver [LO9-1, LO9-2, LO9-3]

Required:

1. Prepare the companys planning budget for September.

2. Prepare the companys flexible budget for September.

3. Calculate the revenue and spending variances for September.

Exercise 9-12 Working with More Than One Cost Driver (LO9-1, LO9-2, LO9-3] 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 reportsthe 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 63 students enrolled in those two courses. Data concerning the company's cost formulas appear below: Cost per Fixed Cost per Cost per Month Course $ 2,910 Student $ 260 $ 75 Instructor wages classroom supplies Utilities Campus rent Insurance Administrative expenses $1,230 $5,200 $2,200 $3,500 $ 41 $ 5 For example, administrative expenses should be $3,500 per month plus $41 per course plus $5 per student. The company's sales should average $870 per student. The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 61 students. The actual operating results for September appear below: Revenue Instructor wages classroom supplies Utilities Campus rent Insurance Administrative expenses Actual $ 51,910 $ 10,920 $ 16,230 $ 1,940 $ 5,200 $ 2,340 $ 3,405 Required 1 Required 2 Required 3 Prepare the company's planning budget for September. Gourmand Cooking School Planning Budget For the Month Ended September 30 Revenue Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense 0 Net operating income 0 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 0 Net operating income $ 0 Required 1 Required 2 Required 3 Calculate the revenue and spending variances for September. (Indicate the effect of each favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all am Gourmand Cooking School Revenue and Spending Variances For the Month Ended September 30 Actual Revenue and Spending Results Variances Flexible Budget Courses 4 Students 61 Revenue $ 51,910 Expenses: Instructor wages 10,920 Classroom supplies 16,230 Utilities 1,940 Campus rent 5,200 Insurance 2,340 Administrative expenses 3,405 Total expense 40,035 Net operating income $ 11,875