Reconciliation of actual and budgeted profit (including overhead variances) A local restaurant has been examining the profitability

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Reconciliation of actual and budgeted profit (including overhead variances)

A local restaurant has been examining the profitability of its set menu. At the beginning of the year the selling price was based on the following predicted costs:image text in transcribed

The selling price was set at £7.50, which produced an overall gross profit of 60%.
During October the number of set menus sold was 860 instead of the 750 budgeted: this increase was achieved by reducing the selling price to £7.00. During the same period an analysis of the direct costs incurred showed:image text in transcribed

There was no stock of ingredients at the beginning or end of the month.
Required:

(a) Calculate the budgeted profit for the month of October. (2 marks)

(b) Calculate the actual profit for the month of October. (3 marks)

(c) Prepare a statement which reconciles your answers to

(a) and

(b) above, showing the variances in as much detail as possible.

(d) Prepare a report, addressed to the restaurant manager, which identifies the two most significant variances, and comments on their possible causes.

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