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    Jagtar Singh Bhinder
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    The London Task provides a flexible budget and analysis of variances for a hotel with 124,000 rooms. The flexible budget estimates contribution margin of £1,148,850 after projected variable costs of £86,940 for labor and £6,210 for room amenities. Fixed costs are budgeted at £235,000, giving an expected operating profit of £913,850. The actual results show unfavorable variances. Sales were lower than budgeted, resulting in an unfavorable static budget variance of £62,100. Labor costs and room amenities costs also came in over budget due to unfavorable efficiency variances, reducing contribution margin and ultimately operating profit compared to the flexible budget.

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    The London Task provides a flexible budget and analysis of variances for a hotel with 124,000 rooms. The flexible budget estimates contribution margin of £1,148,850 after projected variable costs of £86,940 for labor and £6,210 for room amenities. Fixed costs are budgeted at £235,000, giving an expected operating profit of £913,850. The actual results show unfavorable variances. Sales were lower than budgeted, resulting in an unfavorable static budget variance of £62,100. Labor costs and room amenities costs also came in over budget due to unfavorable efficiency variances, reducing contribution margin and ultimately operating profit compared to the flexible budget.

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    Download as DOCX, PDF, TXT or read online from Scribd
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    13 views2 pages

    The London

    Uploaded by

    Jagtar Singh Bhinder
    The London Task provides a flexible budget and analysis of variances for a hotel with 124,000 rooms. The flexible budget estimates contribution margin of £1,148,850 after projected variable costs of £86,940 for labor and £6,210 for room amenities. Fixed costs are budgeted at £235,000, giving an expected operating profit of £913,850. The actual results show unfavorable variances. Sales were lower than budgeted, resulting in an unfavorable static budget variance of £62,100. Labor costs and room amenities costs also came in over budget due to unfavorable efficiency variances, reducing contribution margin and ultimately operating profit compared to the flexible budget.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    of 2

    THE LONDON TASK1

    ROOM DIVISONS:

    (a) FLEXIBLE BUDGET:


    Sales= 1242,000 Labour = 1242000 7 = 86,000 Room amenities: Cost for each room= .50p For 124000 rooms = 1242000 .50 = 6210 Contribution margin = sales- variable cost = 1242000- (86,940) (6210) = 1,148,850 Fixed cost = 235,000 Operating profit = 1148, 850- 235000 = 913850

    Income Statement lineitem Sales Revenue

    Budgeted amount per unit Selling 95 price Sales 162000 volume variance Cleaning labour rate Efficiency variance Room amenity price Efficiency variance 6.80

    Flexible Budgeted (B) 1242000

    Actual Budget (A) 1179900

    Static Budget variance (A) (B) (62100) (U)

    Variable Costs Labour

    86940

    84456

    2484 (F)

    Room Amenities

    8114.4 (F) 0.42 pence 310

    6210

    5216

    994 (F)

    Contribution Margin Fixed Costs

    1148850 235000

    1090228 241000

    (58622) (U) (6000) (U)

    Operating Profit
    (b) Actual paid for labour = 84,456 Budgeted paid for labour = 1242000

    13913850

    849228

    (13064622) (U)

    Room cleaning labour rate per hour = 84,456/ 1242000 = 6.80 Efficiency variance = budgeted price (actual quantity budgeted quantity) = 14(5630.4- 6210) = 8114.4 Favourable (c) Room amenity price = 5216/ 1242 = .42 p Per room amenities = .42p Efficiency variance = Budgeted price (Actual quantity- budgeted quantity) = .50(13,040 12420 (d) Selling price per room= 2

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