Question
In: Accounting
Sabrri Spa offers a variety of skin treatments and spa services, including massages, facials, body treatments,...
Sabrri Spa offers a variety of skin treatments and spa services, including massages, facials, body treatments, and manicures. The spa is owned by the largest dermatology practice in town, and the doctors invested $450,000 to start the spa five years ago. The spa is in its own building next to the clinic, and it has its own staff and management, so almost all of the spa’s costs are direct costs.
The average one-hour treatment is priced at $100. Sabrri has the following cost structure:
|
Variable Cost per Treatment |
Fixed Cost per Month |
||
|
Therapist |
$40 |
||
|
Supplies |
4 |
||
|
Management |
$5,500 |
||
|
Laundry |
X |
||
|
Utilities |
1,400 |
||
|
Rent |
7 |
6,000 |
|
|
Repairs/cleaning |
6 |
1,500 |
|
|
Total |
$57 |
$Y |
Assume that all treatments have the same variable cost structure depicted in the table.
Please complete the following parts
- The costs in the table above are all direct costs associated with the spa, except laundry. The spa and clinic use shared laundry services. The total monthly budget for laundry services is $300. The cost driver is laundry loads, and the laundry services budget is based on 75 loads of laundry for the spa and clinic combined. The spa’s budget should be based on their anticipated use of 50 loads of laundry per month. Determine the amount of laundry cost per month that the spa should budget, and put the number in for “X” in the table above. Then, add up the fixed cost column and put in a number for “Y” in the table above.
- Calculate the number of treatments Sabrri must perform each month in order to break even.
- In April, the therapists are expected to perform 550 treatments. Prepare a budget for April assuming 550 treatments are given.
- Assume some time has passed, and actual results for April are available. The spa actually performed 530 treatments and incurred the following actual costs. Prepare a variance analysis for April comparing actual performance to the simple budget based on 550 treatments that you created in Part C.
|
Actual Operating Results for April |
|||
|
Revenue |
$53,000 |
||
|
Therapists |
$21,280 |
||
|
Supplies |
1,795 |
||
|
Management |
5,125 |
||
|
Laundry |
220 |
||
|
Utilities |
1,505 |
||
|
Rent |
9,710 |
||
|
Repairs/cleaning |
5,080 |
||
|
Total Expenses |
$44,715 |
||
|
Actual Profit |
8,285 |
||
- Explain and interpret the simple variance analysis results that you just determined.
- Prepare a variance analysis for April comparing actual performance to a flexible budget based on the actual number of treatments performed in April of 530 treatments.
- Explain and interpret the flexible variance analysis results that you just calculated.
- Do the break-even calculation you performed in Part B and the budgeted and actual profits computed in Parts C, D, and F accurately capture the true economics of Sabrri, especially from the perspective of the doctors who invested in the spa? Explain why or why not.
Solutions
Expert Solution
| Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks! |
| Sabrri Spa | |
| Answer A | Amount $ |
| Monthly laundry cost | 300.00 |
| Number of laundry | 75.00 |
| Cost per laundry | 4.00 |
| Number of laundry in Spa | 50.00 |
| Cost of laundry in Spa | 200.00 |
| Fixed Cost | |
| Management | 5,500.00 |
| Laundry | 200.00 |
| Utilities | 1,400.00 |
| Rent | 6,000.00 |
| Repairs/cleaning | 1,500.00 |
| Total Fixed Cost | 14,600.00 |
| Answer B | Amount $ |
| Average treatment fee | 100.00 |
| Less: Variable cost per treatment | |
| Therapist | 40.00 |
| Supplies | 4.00 |
| Rent | 7.00 |
| Repairs/cleaning | 6.00 |
| Total Variable cost per treatment | 57.00 |
| Contribution per treatment | 43.00 |
| Total Fixed Cost | 14,600.00 |
| Break even no. of treatments | 339.53 |
| Answer C | Per unit | Variable amount | Fixed Cost | Total | Remarks |
| No. of treatments | 550.00 | ||||
| Average treatment fee | 100.00 | 55,000.00 | 55,000.00 | It is calculated as $ 100* 550 treatments. | |
| Therapist | 40.00 | 22,000.00 | 22,000.00 | It is calculated as $ 40* 550 treatments. | |
| Supplies | 4.00 | 2,200.00 | 2,200.00 | It is calculated as $ 4* 550 treatments. | |
| Management | 5,500.00 | 5,500.00 | It is a fixed cost and does not change with number of treatments. | ||
| Laundry | 200.00 | 200.00 | It is a fixed cost and does not change with number of treatments. | ||
| Utilities | 1,400.00 | 1,400.00 | It is a fixed cost and does not change with number of treatments. | ||
| Rent | 7.00 | 3,850.00 | 6,000.00 | 9,850.00 | It is calculated as $ 7* 550 treatments + fixed cost of $ 6,000. |
| Repairs/cleaning | 6.00 | 3,300.00 | 1,500.00 | 4,800.00 | It is calculated as $ 6* 550 treatments + fixed cost of $ 1,500. |
| Total costs | 31,350.00 | 14,600.00 | 45,950.00 | ||
| Profits | 9,050.00 |
| Answer D | Actual | Simple Budget | Revenue and Spending Variance | Explain A |
| No. of treatments | 530.00 | 550.00 | ||
| Revenue | 53,000.00 | 55,000.00 | 2,000.00 | Unfavorable |
| Expenses | ||||
| Therapist | 21,280.00 | 22,000.00 | 720.00 | Favorable |
| Supplies | 1,795.00 | 2,200.00 | 405.00 | Favorable |
| Management | 5,125.00 | 5,500.00 | 375.00 | Favorable |
| Laundry | 220.00 | 200.00 | 20.00 | Unfavorable |
| Utilities | 1,505.00 | 1,400.00 | 105.00 | Unfavorable |
| Rent | 9,710.00 | 9,850.00 | 140.00 | Favorable |
| Repairs/cleaning | 5,080.00 | 4,800.00 | 280.00 | Unfavorable |
| Total Expenses | 44,715.00 | 45,950.00 | 1,235.00 | Favorable |
| Profits | 8,285.00 | 9,050.00 | 765.00 | Unfavorable |
| Answer B- Flexible Budget | Per unit | Variable amount | Fixed Cost | Total | Remarks |
| No. of treatments | 530.00 | ||||
| Average treatment fee | 100.00 | 53,000.00 | 53,000.00 | It is calculated as $ 100* 530 treatments. | |
| Therapist | 40.00 | 21,200.00 | 21,200.00 | It is calculated as $ 40* 530 treatments. | |
| Supplies | 4.00 | 2,120.00 | 2,120.00 | It is calculated as $ 4* 530 treatments. | |
| Management | 5,500.00 | 5,500.00 | It is a fixed cost and does not change with number of treatments. | ||
| Laundry | 200.00 | 200.00 | It is a fixed cost and does not change with number of treatments. | ||
 ekkarill92 answered 1 year agoRelated SolutionsWrite a discount system for a spa, which provides services and sells products. It offers 3...Write a discount system for a spa, which provides services and
sells products. It offers 3 types of memberships: Premium, Gold and
Silver. Premium, gold and silver members receive a discount of 18%,
12%, and 10%, respectively (this might change in future), for all
services provided. Customers without membership receive no
discount. All members receive a flat 10% discount on products
purchased (this might change in future). Your system shall consist
of four classes: Customer, Discount, Visit,Product and Services. It...
A resort spa services fund required 324,284 USD. These costs will be funded through a variety...A resort spa services fund required 324,284 USD. These costs
will be funded through a variety of sources, including long-term
loan, and personal investment from the owner.
Start-up
Requirements
Startup Expenses
Legal & Registration
$ 11,000
Stationaries Etc
$
2,000
Broucher
$
5,000
Insurance
$
7,000
Website & Online Access
$
3,000
Expensed Equipment (sound system,hardware,software)
$ 180,000
Others
$
5,000
Total Expenses
$ 213,000
Startup Assets
Cash Required
$ 50,254
Startup Inventory
$ 40,000
Other Current Assets
$ 21,000...
Fix 4 Less is a company for cellphone repair. The business offers variety of services such...Fix 4 Less is a company for cellphone repair. The business
offers variety of services such as refurbishing the screens,
selling the parts online (amazon, eBay and bonanza), retail store
for walk in customers and mobile repair services for those who
don't have time to leave their homes or works. Business would like
to add one more service which is selling the parts wholesale to
other retail stores in the same market. After everything is settled
business is planning to...
Fix 4 Less is a company for cellphone repair. The business offers variety of services s......Fix 4 Less is a company for cellphone repair. The business
offers variety of services s... Question: Fix 4 Less is a company
for cellphone repair. The business offers variety of services such
as refurbishing the screens, selling the parts online (amazon, eBay
and bonanza), retail store for walk in customers and mobile repair
services for those who don't have time to leave their homes or
works. Business would like to add one more service which is selling
the parts...
What role does the skin play in the regulation of body temperature?What role does the skin play in the regulation of body
temperature?
3. An agronomist is trying a variety of fertilizer treatments on different parcels of land. The...3. An agronomist is trying a variety of fertilizer treatments on
different parcels of land. The goal is to see how sod yield changes
and whether or not there is a difference across fertilizers. The
numbers below are sod yields in square yards.
Fertilizer Treatment
Qtr Dose Wkly
Half Dose (2 wks) Full Dose (4 wks)
Parcel
A
77
83
80
Parcel
B
79
91
82
Parcel
C
87
94
86
Parcel
D
85
88
85
Parcel
E ...
J & G Merchandising sells a variety of household items including a variety of clocks. The...
J & G Merchandising sells a variety of household items
including a variety of clocks. The business began the first quarter
(January to March) of 2019 with 20 (SeikoQHN006 GLH) non-chiming
clocks at a total cost of $126,800. The business completed the
following transactions relating to that brand and model during the
quarter.
January 8
105 clocks were purchased at a cost of $6,022 each. In
addition the business paid a freight charge of $518 cash on each
clock to...
Part a VenRam Stationery & Supplies sells a variety of school supplies including a variety of...Part a VenRam Stationery & Supplies sells a variety of
school supplies including a variety of calculators. The business
began the first quarter (January to March) of 2018 with 20 (Casio
fx-85MS) calculators at a total cost of $124,800. During the
quarter, the company completed the following transactions. January
8 105 calculators were purchased at a cost of $5,840 each. In
addition the business paid a freight charge of $610 cash on each
calculator to have the inventory shipped from...
Part a VenRam Stationery & Supplies sells a variety of school supplies including a variety of...Part a VenRam Stationery & Supplies sells a variety of
school supplies including a variety of calculators. The business
began the first quarter (January to March) of 2018 with 20 (Casio
fx-85MS) calculators at a total cost of $124,800.
During the quarter, the company completed the following
transactions. January 8 105 calculators were purchased at a cost of
$5,840 each. In addition the business paid a freight charge of $610
cash on each calculator to have the inventory shipped from...
Don Hawk Furnishings sells a variety of decorative pieces including a variety of candle holders. The...Don Hawk Furnishings sells a variety of decorative pieces
including a variety of candle holders. The business began the
second quarter (April to June) of 2018 with 15 (Alanea) candle
holders at a total cost of $108,750. The following transactions
relating to the “Alanea” candle holders were completed during the
quarter.
April 7 90 candle holders were purchased at a cost of $6,850
each. In addition the business paid freight charges of $800 cash on
each candle holder to have...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
ADVERTISEMENT
|