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TipTop Flight School offers flying lessons at a small municipal airport The school’s

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
Results
Planning
Budget
Variances
Lessons   240     235        
                   
Revenue $ 55,060   $ 54,050   $ 1,010 F
Expenses:                  
Instructor wages   11,865     11,750     115 U
Aircraft depreciation   8,400     8,225     175 U
Fuel   4,840     4,230     610 U
Maintenance   4,240     4,125     115 U
Ground facility expenses   2,810     2,875     65 F
Administration   4,280     4,340     60 F
Total expense   36,435     35,545     890 U
Net operating income $ 18,625   $ 18,505   $ 120 F
 

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 $230q
Instructor wages $50q
Aircraft depreciation $35q
Fuel $18q
Maintenance $600 + $15q
Ground facility expenses $1,700 + $5q
Administration $3,400 + $4q
 

  
Required:

2. Complete the flexible budget performance report for the school for July. (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.)

Feb 06 2020 View more View Less

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