Question

QUESTION 1:

Davie's Hotel budgeted 800 room sales for the week ended June 24th. The estimated average price per room was $18.50. The actual average price per room was 10 percent greater than anticipated, while room sales in units were 10 percent less than forecasted.

Complete the following table for the Hotel’s revenue variance analysis.

	Rooms	Rate	Total
Budget	800	$18.50
Actual
Difference

A) Calculate the budget variance.

B) Calculate the price variance.

C) Calculate the volume variance.

D) Calculate the price-volume variance.

Answer 1

Correct Answer:

	Rooms	Rate	Total
Budget	800	$         18.50	$            14,800
Actual	720	$         20.35	$            14,652
Difference	80	$         (1.85)	$               (148)

Material Price Variance	$        1,332.00	Unfavourable-U
Material quantity variance	$        1,480.00	Favourable-F
Material Spending Variance	$           148.00	Favourable-F

Working:

Standard DATA for		800	Rooms
	Quantity (SQ)	Rate (SR)	Standard Cost
Rooms used	800	$         18.50	$            14,800

Actual DATA for		800	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Rooms used	720	$         20.35	$            14,652

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                  18.50	-	$                   20.35	)	x	720
	-1332
	Variance		$             1,332.00			Unfavourable-U

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	800	-	720	)	x	$    18.50
	1480
	Variance		$             1,480.00			Favourable-F

Material volume Variance
(	Standard Cost	-	Actual Cost	)
(	$         14,800.00	-	$           14,652.00	)
	148
	Variance		$                 148.00			Favourable-F

End of Answer.

Thanks