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    Flexible budget variance 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
    Planning Actual
    Budget Results Variances
    Lessons . . . . . . . . . . . . . . . . . . 150 155
    Revenue . . . . . . . . . . . . . . . . . $33,000 $33,900 $900 F
    Expenses:
    Instructor wages . . . . . . . . . 9,750 9,870 120 U
    Aircraft depreciation . . . . . . 5,700 5,890 190 U
    Fuel . . . . . . . . . . . . . . . . . . . 2,250 2,750 500 U
    Maintenance . . . . . . . . . . . . 2,330 2,450 120 U
    Ground facility expenses . . . 1,550 1,540 10 F
    Administration . . . . . . . . . . . 3,390 3,320 70 F
    Total expense . . . . . . . . . . . . . 24,970 25,820 850 U
    Net operating income . . . . . . . $ 8,030 $ 8,080 $ 50 F

    After several months of using such variance reports, the owner has become frustrated. For example,
    she is quite confi dent 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 . . . . . . . . . . . . . . ........................................$220q
    Instructor wages . . . . . . . . . . . . . . . . . . . $65q
    Aircraft depreciation . . . . . . . . . . . . . . . . $38q
    Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15q
    Maintenance . . . . . . . . . . . . . . . . . . . . . . $530 $12q
    Ground facility expenses . . . . . . . . . . . . $1,250 $2q
    Administration . . . . . . . . . . . . . . . . . . . . . $3,240 $1q

    Required:

    1. Should the owner feel frustrated with the variance reports? Explain.

    2. Prepare a flexible budget performance report for the school for July.

    3. Evaluate the school's performance for July.

    © BrainMass Inc. brainmass.com June 3, 2020, 11:35 pm ad1c9bdddf
    https://brainmass.com/business/budgets/flexible-budget-variance-report-286203

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    The solution explains how to prepare a flexible budget variance report

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