'ChickPea Delight' operates fast food restaurants in the food courts of shopping malls. Its main product is a serving of falafel that requires ground chick peas (direct material) and food preparation (direct labor). The April budget for ChickPea Delight's Corvallis restaurant was: - Sales 30,600 servings at $4.50 each - Standard food cost of $0.75 per serving (1/3 pound @$2.25 per pound) - Standard direct labor of $0.50 per serving (1/30th hour @ $15.00 per hour) - Fixed occupancy expenses (rent and equipment) of $8,000 Actual April performance of the Corvallis restaurant was: - Sales 27,000 servings at $4.80 each - Food cost of $18,490 for 8,600 pounds - Direct labor cost of $15,675 for 1,100 hours - Fixed occupancy expenses of $8,200 In early May, the manager received the following financial performance report: ChickPea Delight - Corvallis Performance Report - Month of April The above performance report is misleading! Hint: 'flex' the budget to the actual output and compare this information to the actual figures given to develop the direct material and direct labor variances. See Module 23 in our textbook for a description of flexing the budget. Memo and Appendices The memo should address the following issues about budgeting process: - Explain why 'flexible budget variances' are usually better indicators of performance than 'static budget variances.' - For the month of April, what conclusions can you draw from the materials (price and efficiency) and labor variances (labor rate and efficiency)? (Remember to reference the appendices as support for your conclusions.) - Must give recommendations of action items to address or explore. Improvements? The appendices should provide a reference source for the memo. The following items must be included. - Develop and show in one table (use Exhibit 23.1 as an example) the 'performance report for the month of April.' Include your static budget and flexible budget figures for all categories in this table. - Analyze the direct materials usage and show price and quantity variances. - Analyze the direct labor usage and show labor rate and labor efficiencies variances. - Terminology as usual. 'ChickPea Delight' operates fast food restaurants in the food courts of shopping malls. Its main product is a serving of falafel that requires ground chick peas (direct material) and food preparation (direct labor). The April budget for ChickPea Delight's Corvallis restaurant was: - Sales 30,600 servings at $4.50 each - Standard food cost of $0.75 per serving (1/3 pound @$2.25 per pound) - Standard direct labor of $0.50 per serving (1/30th hour @ $15.00 per hour) - Fixed occupancy expenses (rent and equipment) of $8,000 Actual April performance of the Corvallis restaurant was: - Sales 27,000 servings at $4.80 each - Food cost of $18,490 for 8,600 pounds - Direct labor cost of $15,675 for 1,100 hours - Fixed occupancy expenses of $8,200 In early May, the manager received the following financial performance report: ChickPea Delight - Corvallis Performance Report - Month of April The above performance report is misleading! Hint: 'flex' the budget to the actual output and compare this information to the actual figures given to develop the direct material and direct labor variances. See Module 23 in our textbook for a description of flexing the budget. Memo and Appendices The memo should address the following issues about budgeting process: - Explain why 'flexible budget variances' are usually better indicators of performance than 'static budget variances.' - For the month of April, what conclusions can you draw from the materials (price and efficiency) and labor variances (labor rate and efficiency)? (Remember to reference the appendices as support for your conclusions.) - Must give recommendations of action items to address or explore. Improvements? The appendices should provide a reference source for the memo. The following items must be included. - Develop and show in one table (use Exhibit 23.1 as an example) the 'performance report for the month of April.' Include your static budget and flexible budget figures for all categories in this table. - Analyze the direct materials usage and show price and quantity variances. - Analyze the direct labor usage and show labor rate and labor efficiencies variances. - Terminology as usual