TSE, Inc. is a private, for-profit college that provides educational programs throughout the metropolitan area. Each semester, TSE offers 24 sections of its various business courses.
During the most recent semester (term), TSE prepared a master budget based on the expectation of having an average of 30 students enrolled in 24 classes, or 720 total students. The budgeted tuition (sales price) is $1,500 per student per class. Budgeted variable cost (for copyright clearances, snacks, copies, etc) is $300 per student. The budgeted fixed cost per semester for lecturers, staff and facilities is $480,000.
Actual results for the most recent semester are shown below. The CEO of TSE was pleased to see that the company made a few thousand dollars more than budgeted.
TSE, Inc is Private, for Profit College that Provides Educational Programs throughout the Metropolitan area. Each Semester, TSE, Offers 24 Sections of its Various business courses. During the Msot Recent Semester term TSE Prepared a master Budget based on the Expectation of having an average of 30 students enrolled in 24 classes or 720 total Students. The Bugeted Tuition sales price is $1500 per class. Budgeted variable Cost ( for Copy right Clearances Snacks Copies etc) is $300 per Student. The Budgeted fixed Cost per Semester for lecturers, Staff and Facilities is 480000. Actual Results for the most recent semester are shown below. The CEO of TSE was Pleased to See that the Company made a few thousand Dollars more than budgeted.
Details Actual Budgeted
Number Students 840 720
Tuition Per Students 1400 1500
Variable Cost Per Student 345 300
Total Fixed Cost 500000 480000
1. Complete the flexible budget income statement above
2. Should the CEO be pleased with the overall profit variance of $2,200? Why or why not?
3. Calculate the sales price variance and label it as favorable or unfavorable. Provide one explanation for what might be driving the sales price variance.
4. Assume that a portion of the spending variance for variable costs is due to the cost of copies (handouts) made for each student. The “standard” allows faculty to make up to 100 copies per student at a standard cost of $0.05 per copy. During the most recent term (when 840 students were enrolled), 100,000 copies were made at an actual cost of $4,500.
Calculate the price, usage (efficiency),and overall spending variance for copies (hint: use the DM price and quantity formulas). Label each variance as favorable or unfavorable.
Price Variance for Copies:
Quantity (Usage) Variance for Copies:
Spending Variance for Copies:
5. Suggest two specific ways that the company could improve future profitability?
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