Spa Ariana promotes itself as an upscale spa offering a variety of treatments, including massages, facials, and
Question:
Assume that all treatments have the same variable cost structure depicted in the table. Required: a. Calculate the number of treatments Spa Ariana must perform each month in order to break even.
b. In April, the owners of Ariana expect to perform 550 treatments. Prepare a budget for April assuming 550 treatments are given.
c. In April Spa Ariana performs 530 treatments and incurs the following actual costs. Prepare a performance report for April comparing actual performance to the static budget in part (b) based on 550 treatments.
d. Prepare a performance report for April comparing actual performance to a flexible budget based on the actual number of treatments performed in April of 530.
e. Which of the two performance reports you prepared in parts (c) and ( d ) best reflect the true performance of the Spa Ariana in April? Explain your reasoning.
f. Do the break- even calculation you performed in part (a) and the budgeted and actual profits computed in parts (a)( d ) accurately capture the true economics of the Ariana Spa? Explain why or whynot.
Step by Step Answer:
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman