Reference no: EM132711210

Question - 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 155 150

Revenue $36,920 $36,000 $920

Expenses:

Instructor wages 9,870 9,750 120 U

Aircraft depreciation 4,960 4,800 160 U

Fuel 2,470 1,950 520 U

Maintenance 2,280 2,160 120 U

Ground facility expenses 1,680 1,700 20 F

Administration 3,440 3,520 80 F

Total expense 24,700 23,880 820 U

Net operating income $12,220 $12,120 $100 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 $240q

Instructor wages $65q

Aircraft depreciation $32q

Fuel $13q

Maintenance $510 + $11q

Ground facility expenses $1,250 + $3q

Administration $3,220 + $2q

Required - Complete the flexible budget performance report for the school for July.