PROBLEM 10-21 Critque a Report Prepare a Performance Report LO 10-1, LO 10-4, LO 10-6] TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and m an ager has been attempting to evaluate performance and control costs using a vari ance report that compares the planning budget to actual results. A recent variance report appears below TipTop Flight School Varian ce Report For the Month En ded July 31 ual Planning Resu ts Budget Variances A ct Lessons Revenue Expenses: 155 150 $33,900 $33,000 $900 F Instructor wages Aircraft depreciation Fuel Maintenance Ground facility expenses. Adm inistraton 9,750 5,700 2,250 2,330 1,550 3,390 24,970 $ 8.080 $ 8,030 9,870 5,890 2,750 2,450 1,540 3,320 25,820 120 U 190 U 500 U 120 U 10 F Total expense Net operating incomee 850 U $50 F After several months of using such vari ance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance The planning budget was developed using the following formulas, where g is the number of lessons sold Cost Formulas Revenue Instructor wages Aircraft deprecaton Fuel Maintenance Grou nd facility expenses Administration $220q $65q 38q $15q $530 + $12q $1,250 + $2q $3,240 + $1q Required: 1. Should the owner feel frustrated with the variancereports? Explin. 2. Frepare a flexible budget perform ance report for the school for July 3. Evaluate the school's perform ance for July. Requirement 2. Favorable or Unfavorable Tip Top Flight School Flexible Budget Performance Report For the Month Ended July 31 Actual Revenue and FlexibleActivity Budget Variances Plannin F/U F/U Results Spending Variances Lessons: (0) Revenue: ($2200) Expenses Instructor Wages: ($650) Aircraft Depreciation: ($380 Fuel: ($150) Maintenance: ($530 $120]) Ground Facility Expenses ($1250+ $20) Administration: ($3240$10 Total Expenses Net Operating Income