Recap Exercise 01
Data
Revenue $16.50 q
Cost of ingredients $6.25 q
Wages and salaries $10,400
Utilities $800 + $0.20 q
Rent $2,200
Miscellaneous $600 + $0.80 q
Actual results:
Revenue $27,920
Cost of ingredients $11,110
Wages and salaries $10,130
Utilities $1,080
Rent $2,200
Miscellaneous $2,240
Planning budget activity 1,800 meals served
Actual activity 1,700 meals served
Enter a formula into each of the cells marked with a ? below
Review Problem: Variance Analysis Using a Flexible Budget
Construct a flexible budget performance report
Revenue
and
Actual Spending Flexible Activity Planning
Results Variances Budget Variances Budget
Meals served 1,700 1,700 1,800
Revenue $ 27,920 $ (130) U $ 28,050 $ (1,650) U $ 29,700
Expenses:
Cost of ingredients 11,110 485 U 10,625 (625) F 11,250
Wages and salaries 10,130 (270) F 10,400 - 10,400
Utilities 1,080 (60) F 1,140 (20) F 1,160
Rent 2,200 - 2,200 - 2,200
Miscellaneous 2,240 280 U 1,960 (80) F 2,040
Total expenses 26,760 435 U 26,325 (725) F 27,050
Net operating income $ 1,160 $ (565) U $ 1,725 $ (925) U $ 2,650
Recap Exercise 01
Data
Revenue $16.00 q
Cost of ingredients $6.50 q
Wages and salaries $10,000
Utilities $800 + $0.20 q
Rent $2,200
Miscellaneous $600 + $0.80 q
Actual results:
Revenue $27,920
Cost of ingredients $11,110
Wages and salaries $10,130
Utilities $1,080
Rent $2,200
Miscellaneous $2,240
Planning budget activity 1,800 meals served
Actual activity 1,700 meals served
Enter a formula into each of the cells marked with a ? below
Review Problem: Variance Analysis Using a Flexible Budget
Construct a flexible budget performance report
Revenue
and
Actual Spending Flexible Activity Planning
Results Variances Budget Variances Budget
Meals served 1,700 1,700 1,800
Revenue $ 27,920 $ 720 F $ 27,200 $ (1,600) U $ 28,800
Expenses:
Cost of ingredients 11,110 60 U 11,050 (650) F 11,700
Wages and salaries 10,130 130 U 10,000 - 10,000
Utilities 1,080 (60) F 1,140 (20) F 1,160
Rent 2,200 - 2,200 - 2,200
Miscellaneous 2,240 280 U 1,960 (80) F 2,040
Total expenses 26,760 410 U 26,350 (750) F 27,100
Net operating income $ 1,160 $ 310 F $ 850 $ (850) U $ 1,700
a) Explanation: This variance arises because fewer meals were served than planned.
The company originally planned to serve 1,800 meals, but only 1,700 meals were actually served.
Since revenue is directly tied to the number of meals served ($16 per meal),
the lower actual activity led to a decrease in total revenue compared to the planned budget.
Therefore, this is an unfavorable variance (U) because lower activity led to lower revenue than expected.
b) Explanation: This variance indicates that the actual cost of ingredients was $60 higher than expected for the number of
meals served. Which is $60 more than expected. This unfavorable variance could be due to:
Higher ingredient prices than anticipated.
Wastage or inefficiencies in food preparation.
Purchasing from more expensive suppliers than planned.
umber of
Recap Exercise 01
Data
Revenue $16.50 q
Cost of ingredients $6.25 q
Wages and salaries $10,400
Utilities $800 + $0.20 q
Rent $2,200
Miscellaneous $600 + $0.80 q
Actual results:
Revenue $28,900
Cost of ingredients $11,300
Wages and salaries $10,300
Utilities $1,120
Rent $2,300
Miscellaneous $2,020
Planning budget activity 1,700 meals served
Actual activity 1,800 meals served
Enter a formula into each of the cells marked with a ? below
Review Problem: Variance Analysis Using a Flexible Budget
Construct a flexible budget performance report
Revenue
and
Actual Spending Flexible Activity Planning
Results Variances Budget Variances Budget
Meals served 1,800 1,800 1,700
Revenue $ 28,900 $ (800) U $ 29,700 $ 1,650 F $ 28,050
Expenses:
Cost of ingredients 11,300 50 U 11,250 625 U 10,625
Wages and salaries 10,300 (100) F 10,400 - 10,400
Utilities 1,120 (40) F 1,160 20 U 1,140
Rent 2,300 100 U 2,200 - 2,200
Miscellaneous 2,020 (20) F 2,040 80 U 1,960
Total expenses 27,040 (10) F 27,050 725 U 26,325
Net operating income $ 1,860 $ (790) U $ 2,650 $ 925 F $ 1,725
Overall Performance:The company served more meals than planned (1,800 vs. 1,700), leading to a favorable activity variance of $1,6
Where to Focus Attention: + Revenue Optimization: Investigate why the average revenue per meal was lower and focus on increasing
tivity variance of $1,650 for revenue. Despite this increase in activity, actual revenue was lower than the flexible budget by $800 (unfavorable
nd focus on increasing higher-margin meal sales.+ Cost Efficiency: Monitor ingredient costs to reduce wastage and negotiate better supplier
et by $800 (unfavorable variance), meaning the company did not generate as much revenue per meal as expected. Total expenses were clos
egotiate better supplier deals and maintain control over wages & salaries, ensuring labor cost efficiency without compromising service quality
tal expenses were close to the flexible budget, with a small favorable spending variance of $10. Net operating income fell short due to the un
omising service quality.
short due to the unfavorable revenue variance, leading to a $790 unfavorable variance in income.
