Intermediate: Reconciliation of actual and budgeted profit (including overhead variances)

A local restaurant has been examining the profit¬ ability of its set menu. At the beginning of the year the selling price was based on the following predicted costs:

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:

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

Requirements:

(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.
(14 marks)

(d) Prepare a report, addressed to the restaurant manager, which identifies the two most signif¬ icant variances, and comments on their poss¬ ible causes.

Transcribed Image Text:

() Starter Soup of the day 100 grams of mushrooms @ 3.00 per kg 0.30 Cream and other ingredients 0.20 Main course Roast beef Beef 0.10kgs 1.50 @ 15.00 per kg Potatoes 0.2 kgs 0.05 @ 0.25 per kg Vegetables 0.3 kgs 0.27 @ 0.90 per kg Other ingredients and 0.23 accompaniments Dessert Fresh tropical fruit salad Fresh fruit 0.15 kgs 0.45 @ 3.00 per kg