B-22.04 Problem - vary with activity The other costs are...

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B-22.04 Water 13 000 10 000 (3 000) University Inn's most recent monthly expense analysis report revealed significant cost overruns. The manager was asked to explain the deviations. Below is the "budget v. actual" expense report for the month in question. University Inn Budget v. Actual Expense Report For the Month Ending October 31, 20X7 Actual Budget Variance Utilities $ 52,000 $ 45,000 $ (7,000) Laundry 20,000 18,000 (2,000) Food service 41,000 35,000 (6,000) Rent/taxes 60,000 60,000 - Staff wages 57,000 55,000 (2,000) Management salaries 43,500 45,000 1,500 , , , Maintenance 15,200 15,000 (200) $ 301,700 $ 283,000 $ (18,700) The Inn has observed that utilities, water, food service, staff wages, and laundry costs all
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Unformatted text preview: vary with activity. The other costs are fixed. The budget reflected above was based upon an assumed 80% occupancy rate. The university's football team was on a winning streak and numerous alumni were returning to campus in October, resulting in a 96% occupancy rate during the month. Prepare a "flexible budget" based upon a 96% occupancy rate, and identify whether the Inn is being efficienctly or inefficiently run. Comment on specific costs, and note why a flexible budget can improve performance evaluations....
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