Question

The Toque Cooking Academy runs short cooking courses at itssmall campus. Management has identified two cost drivers that ituses in its budgeting and performance reports—the number of coursesand the total number of students. For example, the school might runfour courses in a month and have a total of 65 students enrolled inthose four courses. Data concerning the company’s cost formulasappear below:

	Fixed Cost per Month		Cost per Course	Cost per Student
Instructorwages			$2,920
Classroomsupplies				$280
Utilities	$	1,220	$70
Campus rent	$	4,900
Insurance	$	2,300
Administrativeexpenses	$	4,000	$42	$7

For example, administrative expenses should be $4,000 per monthplus $42 per course plus $7 per student. The company’s sales shouldaverage $860 per student.

The actual operating results forOctober appear below:

	Actual
Revenue	$	53,000
Instructorwages	$	10,960
Classroomsupplies	$	18,050
Utilities	$	1,910
Campus rent	$	4,900
Insurance	$	2,440
Administrativeexpenses	$	4,049

Required:

1.

The Toque Cooking Academy expects to run four courses with atotal of 65 students in October. Complete the company’s planningbudget for this level of activity.

Toque Cooking Academy
Planning Budget
For the Month Ended October 31
Revenue	$55,900
Expenses:
Instructor wages	11,680
Classroom supplies	18,200
Utilities	1,900
Campus rent	4,900
Insurance	2,300
Administrative expenses	4,000
Total expense	42,980
Net operating income	$12,920

2.

The school actually ran four courses with a total of 63 studentsin October. Complete the company’s flexible budget for this levelof activity.

Toque Cooking Academy
Flexible Budget
For the Month Ended October 31
Revenue	$54,180
Expenses:
Instructor wages	10,960
Classroom supplies	17,640
Utilities	1,910
Campus rent	4,900
Insurance	2,300
Administrative expenses	4,000
Total expense	41,710
Net operating income	$12,470

3.

Complete the flexible budget performance report that shows bothactivity variances and revenue and spending variances for October.(Indicate the effect of each variance by selecting "F" forfavorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Input all amounts as positive values.)

Toque Cooking Academy
Flexible Budget Performance Report
For the Month Ended October 31
	Activity Variances		Revenue and Spending Variances
Revenue
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Total expense
Net operating income