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1 Spruce Street Shelter Case 2 Required: Please fill in the highlighted cells using numbers from the case and formulas when appropriate and specify if each variance is favorable or unfavorable 4 Name: 6 Spruce Street Shelter - Laundry Department 7 1) Flexible budget and total variance decomposition Rate per pound Activity variance Favorable or Unfavorable Spending variance Favorable or Unfavorable Flexible Budget 11.900 156.600 Master budget 9,500 125.000 Actual 11.900 156.600 10 Activity 11 Client nights 12 Pounds of laundry processed 13 Costs 14 Laundry labor 15 Supplies 16 Water & water heating & softening 17 Maintenance 18 Supervisor's salary 19 Allocated administrative costs 20 Equipment depreciation 21 Total 23 2) Laundry labor - Spending variance analysis Actual labor minutes at budgeted labor rate 25 Client nights 26 Pounds of laundry processed 11.900 156,600 Budgeted labor cost Actual labor cost $ 9.00 28 Budgeted labor rate per hour 29 Actual labor rate per hour Labor Labor efficiency Variance Favorable or Unfavorable Favorable or Unfavorable Variance 31 Budgeted labor rate per minute 32 Actual labor rate per minute 34 Budgeted labor minutes per pound 5 Actual labor minutes per pound the prior fiscal year's costs less 3 percent for the current year's budget. He decided to measure ac tivity by client nights, and to set the budget for pounds of laundry processed at last year's level. which was approximately equal to the volume of each of the past three years. Quarterly budgets were computed as one-fourth of the annual budget. Mr. Donaldson had re- ceived the report shown in Exhibit I in mid-January. He reflected on its content: A lot of my costs don't change, even if the number of pounds of laundry changes. I suppose laundry la- bor, supplies, water-related items, and maintenance vary with changes in pounds, but that's about all. Nevertheless, shouldn't my budget reflect those changes? Also, I hadn't planned for the fact that I was given a salary increase as of October 1 - Was I supposed to refuse it to help keep my budget in balance? Finally, I think it's important to note that I had to pay overtime to the staff because the department became inundated with laundry during the cold snap we had back in mid-December. Because of this, my average hourly rate for the whole three months was $10.20 instead of the $9.00 that was in my budget. In fact, and maybe this is a little picky, the average number of minutes it took my staff to wash a pound of laundry actually dropped from 48, which was my budget target, to 47 for the quarter. Somehow, even though it's pretty small, I think that should be taken into consideration. SPRUCE STREET SHELTER Exhibit 1. Performance Report -- Laundry Department October - December (Over) Under Budget Budget % (Over) Under Budget Actual? Client nights Pounds of laundry processed 9,500 125,000 11,900 156,600 (2,400) (31,600) (25) (25) Costs Laundry labor $9,000 Supplies 1,125 Water and water heating and softening 1,750 Maintenance 1,375 Supervisor's salary 3,125 Allocated administrative costs 4,000 Equipment depreciation 1,250 Total $21,625 $12,512 1,875 2,500 2,200 3,750 5,000 1,250 $(3,512) (750) (750) (825) (625) (1,000) 8| -CESESS ce $29,087 $(7,462) 1 Spruce Street Shelter Case 2 Required: Please fill in the highlighted cells using numbers from the case and formulas when appropriate and specify if each variance is favorable or unfavorable 4 Name: 6 Spruce Street Shelter - Laundry Department 7 1) Flexible budget and total variance decomposition Rate per pound Activity variance Favorable or Unfavorable Spending variance Favorable or Unfavorable Flexible Budget 11.900 156.600 Master budget 9,500 125.000 Actual 11.900 156.600 10 Activity 11 Client nights 12 Pounds of laundry processed 13 Costs 14 Laundry labor 15 Supplies 16 Water & water heating & softening 17 Maintenance 18 Supervisor's salary 19 Allocated administrative costs 20 Equipment depreciation 21 Total 23 2) Laundry labor - Spending variance analysis Actual labor minutes at budgeted labor rate 25 Client nights 26 Pounds of laundry processed 11.900 156,600 Budgeted labor cost Actual labor cost $ 9.00 28 Budgeted labor rate per hour 29 Actual labor rate per hour Labor Labor efficiency Variance Favorable or Unfavorable Favorable or Unfavorable Variance 31 Budgeted labor rate per minute 32 Actual labor rate per minute 34 Budgeted labor minutes per pound 5 Actual labor minutes per pound the prior fiscal year's costs less 3 percent for the current year's budget. He decided to measure ac tivity by client nights, and to set the budget for pounds of laundry processed at last year's level. which was approximately equal to the volume of each of the past three years. Quarterly budgets were computed as one-fourth of the annual budget. Mr. Donaldson had re- ceived the report shown in Exhibit I in mid-January. He reflected on its content: A lot of my costs don't change, even if the number of pounds of laundry changes. I suppose laundry la- bor, supplies, water-related items, and maintenance vary with changes in pounds, but that's about all. Nevertheless, shouldn't my budget reflect those changes? Also, I hadn't planned for the fact that I was given a salary increase as of October 1 - Was I supposed to refuse it to help keep my budget in balance? Finally, I think it's important to note that I had to pay overtime to the staff because the department became inundated with laundry during the cold snap we had back in mid-December. Because of this, my average hourly rate for the whole three months was $10.20 instead of the $9.00 that was in my budget. In fact, and maybe this is a little picky, the average number of minutes it took my staff to wash a pound of laundry actually dropped from 48, which was my budget target, to 47 for the quarter. Somehow, even though it's pretty small, I think that should be taken into consideration. SPRUCE STREET SHELTER Exhibit 1. Performance Report -- Laundry Department October - December (Over) Under Budget Budget % (Over) Under Budget Actual? Client nights Pounds of laundry processed 9,500 125,000 11,900 156,600 (2,400) (31,600) (25) (25) Costs Laundry labor $9,000 Supplies 1,125 Water and water heating and softening 1,750 Maintenance 1,375 Supervisor's salary 3,125 Allocated administrative costs 4,000 Equipment depreciation 1,250 Total $21,625 $12,512 1,875 2,500 2,200 3,750 5,000 1,250 $(3,512) (750) (750) (825) (625) (1,000) 8| -CESESS ce $29,087 $(7,462)