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28 Sep 2019
Problem 17-38 Analyze Performance for a Restaurant (LO 17-5)
Dougâs Diner is planning to expand operations and is concernedthat its reporting system might need improvement. The master budgetincome statement for the Downtown Dougâs, which contains adelicatessen and restaurant operation, follows (in thousands):
Delicatessen Restaurant Total Sales revenue $ 600 $ 2,000 $ 2,600 Costs Purchases 360 1,100 1,460 Hourly wages 30 438 468 Franchise fee 18 39 57 Advertising 50 100 150 Utilities 42 63 105 Depreciation 25 38 63 Lease cost 15 25 40 Salaries 15 25 40 Total costs $ 555 $ 1,828 $ 2,383 Operating profit $ 45 $ 172 $ 217
The company uses the following performance report for managementevaluation:
DOWNTOWN DOUGâS NetIncome for the Year ($000) Actual Results Actual Results Delicatessen Restaurant Total Budget Over-or
(Under-) Budgeta Sales revenue $ 700 $ 1,000 $ 1,700 $ 2,600 $ (900 ) Costs Purchasesb 450 400 850 1,460 $ (610 ) Hourly wagesb 35 350 385 468 (83 ) Franchise feeb 21 30 51 57 (6 ) Advertising 50 100 150 150 Utilitiesb 45 50 95 105 (10 ) Depreciation 25 38 63 63 Lease cost 15 25 40 40 Salaries 15 25 40 40 Total costs $ 656 $ 1,018 $ 1,674 $ 2,383 $ (709 ) Operating profit $ 44 $ (18 ) $ 26 $ 217 $ (191 )
a There is no sales price variance.
b Variable costs; all other costs are fixed.
Required:
Actual Purchases Variances Marketing & Administrative Variances Flexible Budget Activity Variance Master Budget Sales revenue $700 $600 Variable costs: Purchases 450 360 Hourly wages 35 30 Franchise fee 21 18 Utilities 45 42 Total variable costs $551 $450 Contribution margin $149 $150 Fixed costs: Advertising 50 50 Depreciation 25 25 Lease 15 15 Salaries 15 15 Total fixed costs $105 $105 Operating profit $44 $45
Problem 17-38 Analyze Performance for a Restaurant (LO 17-5)
Dougâs Diner is planning to expand operations and is concernedthat its reporting system might need improvement. The master budgetincome statement for the Downtown Dougâs, which contains adelicatessen and restaurant operation, follows (in thousands):
Delicatessen | Restaurant | Total | |||||||||||||
Sales revenue | $ | 600 | $ | 2,000 | $ | 2,600 | |||||||||
Costs | |||||||||||||||
Purchases | 360 | 1,100 | 1,460 | ||||||||||||
Hourly wages | 30 | 438 | 468 | ||||||||||||
Franchise fee | 18 | 39 | 57 | ||||||||||||
Advertising | 50 | 100 | 150 | ||||||||||||
Utilities | 42 | 63 | 105 | ||||||||||||
Depreciation | 25 | 38 | 63 | ||||||||||||
Lease cost | 15 | 25 | 40 | ||||||||||||
Salaries | 15 | 25 | 40 | ||||||||||||
Total costs | $ | 555 | $ | 1,828 | $ | 2,383 | |||||||||
Operating profit | $ | 45 | $ | 172 | $ | 217 | |||||||||
The company uses the following performance report for managementevaluation:
DOWNTOWN DOUGâS | |||||||||||||||||||||||
NetIncome for the Year | |||||||||||||||||||||||
($000) | |||||||||||||||||||||||
Actual Results | |||||||||||||||||||||||
Actual Results | Delicatessen | Restaurant | Total | Budget | Over-or (Under-) Budgeta | ||||||||||||||||||
Sales revenue | $ | 700 | $ | 1,000 | $ | 1,700 | $ | 2,600 | $ | (900 | ) | ||||||||||||
Costs | |||||||||||||||||||||||
Purchasesb | 450 | 400 | 850 | 1,460 | $ | (610 | ) | ||||||||||||||||
Hourly wagesb | 35 | 350 | 385 | 468 | (83 | ) | |||||||||||||||||
Franchise feeb | 21 | 30 | 51 | 57 | (6 | ) | |||||||||||||||||
Advertising | 50 | 100 | 150 | 150 | |||||||||||||||||||
Utilitiesb | 45 | 50 | 95 | 105 | (10 | ) | |||||||||||||||||
Depreciation | 25 | 38 | 63 | 63 | |||||||||||||||||||
Lease cost | 15 | 25 | 40 | 40 | |||||||||||||||||||
Salaries | 15 | 25 | 40 | 40 | |||||||||||||||||||
Total costs | $ | 656 | $ | 1,018 | $ | 1,674 | $ | 2,383 | $ | (709 | ) | ||||||||||||
Operating profit | $ | 44 | $ | (18 | ) | $ | 26 | $ | 217 | $ | (191 | ) | |||||||||||
a There is no sales price variance.
b Variable costs; all other costs are fixed.
Required:
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Irving HeathcoteLv2
28 Sep 2019