Question

The restaurant at the Hotel Galaxy offers two choices for breakfast: an all-you-can-eat buffet and an a la carte option, where diners can order from the menu. The buffet option has a budgeted meal price of $45. The a la carte option has a budgeted average price of $34 for a meal. The restaurant manager expects that 40 percent of its diners will order the buffet option. The buffet option has a budgeted variable cost of $25 and the a la carte option averages $18 per meal in budgeted variable cost. The manager estimates that 2,000 people will order a meal in any month.

For July, the restaurant served a total of 1,800 meals, including 600 buffet options. Total revenues were $27,600 for buffet meals and $42,000 for the a la carte meals.

Required:

a. Compute the activity variance for the restaurant for July. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

b. Compute the mix and quantity variances for July. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

Basic Calculation:

Particulars	Budgeted Price (BP) $	Budgeted Quantity (BQ)	Actual Quantity (AQ)	Budgeted Sales (BP*BQ)	Standard sales (BP*AQ)	Revised Actual Quantity (RAQ)*	Revised Actual sales (BP*RAQ)
Buffet	45	800	600	36000	27000	720	32400
A la carte	34	1200	1200	40800	40800	1080	36720
		2000	1800			1800

* RAQ=Budgeted proportion of actual sales

RAQ of Buffet= 1800*800/2000 =720

RAQ of a la carte=1800*1200/2000=1080

Computation of variances

Statement showing variances ($)

Particulars	Buffet	A la carte	Total
Sales Activity variance = Standard sales-Budgeted sales	=27000-36000 =9000 (U)	=40800-40800 =0	9000 (U)
Sales Mix Variance=standard sales-Revised standard sales	=27000-32400 =5400 (U)	=40800-36720 =4080 (F)	1320 (U)
Sales Quantity variance= Revised standard sales-Budgeted sales	=32400-36000 =3600 (U)	=36720-40800 =4080 (U)	7680 (U)