Wednesday, March 19, 2014

Exercise 9-16 Working with More Than One Cost Driver [LO4, LO5]
The Toque Cooking Academy runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run four courses in a month and have a total of 60 students enrolled in those four courses. Data concerning the company’s cost formulas appear below:

 Fixed Cost per MonthCost per CourseCost per
Student
  Instructor wages  $2,980    
  Classroom supplies     $310   
  Utilities$1,230   $85    
  Campus rent$5,100       
  Insurance$2,340         
  Administrative expenses$3,940   $46  $7   


For example, administrative expenses should be $3,940 per month plus $46 per course plus $7 per student. The company’s sales should average $850 per student.

The actual operating results for October appear below:

  Actual
  Revenue$48,100  
  Instructor wages$11,200  
  Classroom supplies$18,450  
  Utilities$1,980  
  Campus rent$5,100  
  Insurance$2,480  
  Administrative expenses$3,970  


Required:
1.
The Toque Cooking Academy expects to run four courses with a total of 60 students in October. Complete the company’s planning budget for this level of activity. (Input all amounts as positive values. Omit the "$" sign in your response.)

Toque Cooking Academy
Planning Budget
For the Month Ended October 31
  Revenue   
  Expenses: 
    Instructor wages   
    Classroom supplies   
    Utilities   
    Campus rent   
    Insurance   
    Administrative expenses   

  Total expense   
 
  Net operating income   
 



2.
The school actually ran four courses with a total of 58 students in October. Complete the company’s flexible budget for this level of activity. (Input all amounts as positive values. Omit the "$" sign in your response.)

Toque Cooking Academy
Flexible Budget
For the Month Ended October 31
  Revenue   
  Expenses: 
    Instructor wages   
    Classroom supplies   
    Utilities   
    Campus rent   
    Insurance   
    Administrative expenses   

  Total expense   
 
  Net operating income   
 



3.
Complete the flexible budget performance report that shows both activity variances and revenue and spending variances for October. (Input all amounts as positive values. 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). Omit the "$" sign in your response.)

Toque Cooking Academy
Flexible Budget Performance Report
For the Month Ended October 31
 Activity VariancesRevenue and Spending Variances
  Revenue    U    U
 
 
 
  Expenses:    
     Instructor wages    None    F
     Classroom supplies    F    U
     Utilities    None    U
     Campus rent    None    None
     Insurance    None    U
     Administrative expenses    F    F

 
 
  Total expense    F    F
 
 
 
  Net operating income    U    U
 

 

 


 

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