Question

Problem 9-22 Critique a Report; Prepare a Performance Report [LO9-1, LO9-2, LO9-3, LO9-4, LO9-6] TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below: TipTop Flight School Variance Report For the Month Ended July 31 Actual Planning Budget Variances Results Lessons 180 175 $ 41,290 $ 40,250 $1,040 F Revenue Expenses: 145 U Instructor wages Aircraft depreciation 10,645 6,840 3,090 2,700 10,500 6,650 190 U 2,450 2,555 Fuel 640 U Maintenance 145 U 2,470 3,885 29,630 $ 11,660 $ 11,560 $ Ground facility expenses 80 F 2,550 Administration 3,985 100 F Total expense 28,690 940 U 100 F Net operating income After several months of using such variance 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 q is the number of lessons sold:

Answer 1

Answer

	Actual results	Revenue & Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Lessons	180			180			175
Revenues	$            41,290.00	$                 110.00	Unfavorable	$          41,400.00	$              1,150.00	Favourable	$              40,250.00
Expenses:
Instructer wages	$            10,645.00	$                 155.00	Favourable	$          10,800.00	$                  300.00	Unfavorable	$              10,500.00
Aircraft Depreciation	$              6,840.00	$                          -	None	$             6,840.00	$                  190.00	Unfavorable	$                 6,650.00
Fuel	$              3,090.00	$                 570.00	Unfavorable	$             2,520.00	$                    70.00	Unfavorable	$                 2,450.00
Maintenance	$              2,700.00	$                   90.00	Unfavorable	$             2,610.00	$                    55.00	Unfavorable	$                 2,555.00
Ground Facility Expenses	$              2,470.00	$                 100.00	Favourable	$             2,570.00	$                    20.00	Unfavorable	$                 2,550.00
Administration	$              3,885.00	$                 115.00	Favourable	$             4,000.00	$                    15.00	Unfavorable	$                 3,985.00
Total Expenses	$            29,630.00	$                 290.00	Unfavorable	$          29,340.00	$                  650.00	Unfavorable	$              28,690.00
Net Operating Income	$            11,660.00	$                 400.00	Unfavorable	$          12,060.00	$                  500.00	Favourable	$              11,560.00

--Working

	Actual results	Flexible Budget	Planning Budget
Lessons	180	180	175
Revenues	41290	=180*230	=175*230
Expenses:
Instructer wages	10645	=180*60	=175*60
Aircraft Depreciation	6840	=180*38	=175*38
Fuel	3090	=180*14	=175*14
Maintenance	2700	=630+(180*11)	=630+(175*11)
Ground Facility Expenses	2470	=1850+(180*4)	=1850+(175*4)
Administration	3885	=3460+(180*3)	=3460+(175*3)