Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 08 Oct 2017 My Price 10.00

small municipal airport.

EXERCISE 9–15 Critique a Report; Prepare a Performance Report [LO1, LO4, LO6]

Wings 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:

 

 

 

 

Planning Budget

 

Actual Results

 

 

Variances

Lessons  . . . . . . . . . . . . . . . . . . . . .

200

 

210

 

 

Revenue . . . . . . . . . . . . . . . . . . . . .

$45,000

 

$47,300

 

$2,300 F

Expenses:

Instructor wages . . . . . . . . . . . . .

 

12,400

 

 

12,910

 

 

510 U

Aircraft depreciation . . . . . . . . . .

11,400

 

11,970

 

570 U

Fuel . . . . . . . . . . . . . . . . . . . . . . .

4,200

 

5,150

 

950 U

Maintenance . . . . . . . . . . . . . . . .

3,270

 

3,470

 

200 U

Ground facility expenses . . . . . . .

2,440

 

2,350

 

90 F

Administration . . . . . . . . . . . . . . .

4,410

 

4,340

 

70 F

Total expense . . . . . . . . . . . . . . . . .

38,120

 

40,190

 

2,070 U

Net operating income . . . . . . . . . . .

$  6,880

 

$  7,110

 

$   230 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 August, but the report shows an unfavorable  variance.

 

The planning budget was developed using the following formulas, where q is the number of lessons sold:

 

Text Box: Revenue . . . . . . . . . . . . . . . . . . . . . . . $225q Instructor wages . . . . . . . . . . . . . . . . . $62q Aircraft depreciation . . . . . . . . . . . . . . $57q Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . $21q Maintenance . . . . . . . . . . . . . . . . . . . . $670 + $13q Ground facility expenses . . . . . . . . . . . $1,640 + $4q Administration. . . . . . . . . . . . . . . . . . . $4,210 + $1q

 

Required:

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

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

3.       Evaluate the school’s performance for August.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 08 Oct 2017 10:10 PM My Price 10.00

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