Question

EXY 1 fuly so. . 288. Brink Tech is a for-profit vocational school. The school bases its budgets on two measure of activity (i.e., cost drivers), namely student and course. The school uses the following data 1 its budgeting: Fixed W. Variable Variable element per element per element per month student course Revenue...................... $0 $212 . SO Faculty wages..................... . SO $2,000 Course supplies....... SO $26. $14 Administrative expenses..... $22,200 $12 - $35 In June, the school budgeted for 1.710 students and 110 courses. The school's income statement showing the actual results for the month appears below: 1/y s/w/14 - 202 1.510 - 22 Brink Tech | 1 Income Statement For the Month Ended June 30 Actual students................ Actual courses ................... 107 Revenue....... .............. $319,730 Expenses: Faculty wages................. 216,360 Course supplies............... 40,548 Administrative expenses. 43.325 Total expense ..................... 300.233 Net operating income........ $19.497 MO 107 Required: Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending variances for June. Label each variance as favorable (F) or unfavorable (U). pute utatis M. Comput for the achiuty : Venance weiges esperse

hello
I need detailed answers to this question. thank you

Answer 1

Master budget with 1710 students and 110 courses:

Revenue = $ 212 x 1710 = $ 362520

Faculty wages = $2000 x 110 = $ 220000

Course supplies = $ 26 x 1710 + $ 14 x 110 = $ 46000

Administrative expenses(variable) = $ 12 x 1710 + $ 35 x 110

= $ 24370

Administrative expenses (fixed) = $ 22200

The fixed element does not change irrespective of number of students or courses.

Flexible budget at 1510 students and 107 courses:

Revenue= $ 212 x 1510 = $ 320120

Faculty wages = $ 2000 x 107 = $ 214000

Course supplies = $ 26 x 1510 + $ 14 x 107 = $ 40758

Administrative expenses (variable) = $12 x 1510 + $ 35 x 107

= $ 21865

Administrative expenses (fixed) = $ 22200

Revenue variances:

Sales price variance = Actual revenue - flexible budget revenue

= $(319730 - 320120) = $ 390 U

Sales activity variance = Flexible budget revenue - Master budget revenue

= $ (320120 - 362520) = $ 42400 U

Faculty wages variances:

Faculty wages cost variance = Actual cost - Flexible budget costs

= $ (216360 - 214000) = $ 2360 U

Faculty wages activity variance = Flexible budget costs - master budget costs

= $ (214000 - 220000) = $ 6000 F

Course supplies variances:

Course supplies cost variance = Actual costs - flexible budget costs

= $ (40548 - 40758) = $ 210 F

Course supplies activity variance = Flexible budget costs - master budget costs

= $ (40758 - 46000) = $ 5242 F

Administrative expenses variances:

Cost variance= actual costs - flexible budget costs (variable +fixed)

= $ (43325 - 44065) = $ 740 F

Activity variance = flexible budget costs- master budget costs (variable + fixed)

= $ (44065 - 46570) = $ 2505 F

Particulars	Actual figures	Faculty wages variance	F/U	Course supplies variance	F/U	Administrative expenses variance	F/U	Sales price variance	F/U	Flexible budget	Sales activity variance	F/U	Master budget
Revenue	319730							390	U	320120	42400	U	362520
Expenses:
Faculty wages	216360	2360	U							214000	6000	F	220000
Course supplies	40548			210	F					40758	5242	F	46000
Administrative expenses	43325					740	F			44065	2505	F	46570
Total expenses	300233
Net operating income	19497	2360	U	210	F	740	F	390	U	21297	28653	U	49950

The performance report shows that the school has exceeded the budgetary costs in terms of faculty payment. This must be looked into carefully by the management. This has lowered profits by $ 2360. The sales price variance shows that the school has charged less to students than the budgeted amount. Other cost variances are favourable which means that costs are being incurred within the limits.

If you look at the revenue activity variance you would notice that there is a shortfall of $ 28653 in net operating income, thus in future the management can try to enroll more students to try and fill the gap.