Budgeting and Internal Controls #2 Worksheet

MGT 225 - Managerial Accounting

1. Dee Flowers is the sole owner of the most successful catering business in town. December is her busiest month, and she has just completed it. Dee now has a chance to take a moment and evaluate the operations budget she has prepared for the month of December, as well as the actual results achieved by her company. Dee uses a slightly modified version of the Uniform System of Accounts for Restaurants (USAR) to prepare her budgets because she wants to identify her total gross profit (revenue less cost of sales). Below are her original operations budget and her actual operating results for the month. Complete the sheet for her by providing variance dollars and variance percentages for each budgeted item and then answer the questions that follow. (Test your Skills 6)

Dee's Catering Budget Versus Actual Comparison for December

	Budget ($)	%	Actual ($)	%	Variance ($)	%
SALES
Food	185,200	73.9	193,251	68.4
Beverage	65,250	26.1	89,250	31.6
Total Sales	250,450	100.0	282,501	100.0
COST OF SALES
Food	67,500	36.4	68,925	35.7
Beverage	14,500	22.2	20,415	22.9
Total Cost of Sales	82,000	32.7	89,340	31.6
GROSS PROFIT
Food	117,700	63.6	124,326	64.3
Beverage	50,750	77.8	68,835	77.1
Total Gross Profit	168,450	67.3	193,161	68.4
OPERATING EXPENSES
Management and Staff	38,750	15.5	44,850	15.9
Employee Benefits	9,500	3.8	11,203	4.0
Direct Operating Expenses	26,500	10.6	27,210	9.6
Music and Entertainment	0	0.0	0	0.0
Marketing	1,200	0.5	150	0.1
Utility Services	3,250	1.3	3,289	1.2
Repairs and Maintenance	3,500	1.4	2,874	1.0
Administrative and General	24,750	9.9	25,598	9.1
Occupancy	1,200	0.5	1,200	0.4
Depreciation	2,200	0.9	2,200	0.8
Total Operating Expenses	110,850	44.3	118,574	42.0
OPERATING INCOME	57,600	23.0	74,587	26.4
Interest	7,100	2.8	7,100	2.5
INCOME BEFORE INCOME TAXES	50,500	20.2	67,487	23.9
Income Taxes	12,625	5.0	16,872	6.0
NET INCOME	37,875	15.1	50,615	17.9

What is the variance (dollar and percent) in Dee's total cost of sales for the month of December?

To what do you attribute the variance in Dee's total cost of sales for the month of December?

What is the variance (dollar and percent) in Dee's management and staff costs for the month of December?

To what do you attribute the variance in Dee's management and staff costs for the month of December?

What is the variance (dollar and percent) in Dee's marketing expenses for the month of December?

What advice would you give Dee regarding her marketing expense variance?

What is the variance (dollar and percent) in Dee's net income for the month of December?

To what do you attribute the variance in Dee's net income for the month of December?