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 $35. The a la carte option has a budgeted average price of $24 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 $15 and the a la carte option averages $10 per meal in budgeted variable cost. The manager estimates that 2,500 people will order a meal in any month.

For July, the restaurant served a total of 2, 400 meals, including 940 buffet options. Total revenues were $47, 940 for buffet meals and $61, 320 for the a la carte meals.

Required:
Compute the volume variance (also known as activity variance) for the restaurant for July.

Answer 1

Answer:

Hotel Galaxy

The volume variance (also known as activity variance) for the restaurant for July is:

= 100 meals.

Explanation:

a) Data and Calculations:

                                              All-you-can-eat      A la carte   Combined

Budgeted meal price                      $35                  $24           $59

Percentage of dinners' orders       40%                  60%         100%

Budgeted variable cost per meal  $15                   $10            $25

Expected meals                           1,000                1,500        2,500

Actual results:

Total number of meals                940                 1,460         2,400

Total revenues                     $47,940            $61,320   $109,260

Volume variance for:

                                              All-you-can-eat      A la carte     Combined

Expected number of meals        1,000                    1,500             2,500

Actual number of meals               940                    1,460              2,400

Volume Variance                            60                         40                 100

Volume variance (also known as activity variance) for the restaurant for July is:

= Budgeted number of meals Minus Actual number of meals

= 2,500 - 2,400

= 100 meals