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 220 $ 56,890
Revenue 215 $ 55,900 $ 990 F
Expenses:
Instructor wages 16,315 $ 19,640 190 U
Aircraft depreciation 7,260 16,125 165 U
Fuel 4,030 7,095 590 U
Maintenance 3,780 3,440 190 U
Ground facility expenses 2,190 3,590 55 F
Administration 3,675 2,245 115 F
Total expense 37,250 3,790 965 U
Net operating income 36,285 $ 19,615 $ 25 F
After several months of using these 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 2687
Instructor wages $759
Aircraft depreciation $339
Fuel $169
Maintenance $580 + $149
Ground facility expenses $1,600 + $39
Administration $3,360 + $24
Complete the flexible budget performance report for the school for July.