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    Preparing a Flexible Budget Performance Report

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    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

    Budget Actual
    Results Variances

    Lessons 142 167
    Revenue $29,252 $45,200 $15,948 F

    Instructor wages 9,230 10,650 1,420 U
    Aircraft depreciation 5,396 6,346 950 U
    Fuel 1,704 2,800 1,096 U
    Maintenance 2,216 2,640 424 U
    Ground facility expenses 1,806 1,420 386 F
    Administration 3,552 3,220 332 F

    Total expense





    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:

    Cost Formulas
    Revenue $206q
    Instructor wages $65q
    Aircraft depreciation $38q
    Fuel $12q
    Maintenance $512 + $12q
    Ground facility expenses $1,380 + $3q
    Administration $3,410 + $1q

    Prepare a flexible budget performance report for the school for July. (Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)
    TipTop Flight School
    Flexible Budget Performance Report
    For the Month Ended July 31
    Activity Variances Revenue and Spending Variances
    Revenue $


    Instructor wages

    Aircraft depreciation



    Ground facility expenses


    Total expense

    Net operating income $


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    Solution Summary

    The solution prepares a flexible budget performance report.