Consider the Costs

Sofia Lancaster is the registered dietitian (RD) responsible for all dietary services at Parker Meridian Memorial Hospital. Her operation consists of two departments. The first, and largest, is patient feeding. It consists of the tray line staff and the majority of her food production staff.

The second department is the public cafeteria, which includes special dining areas for hospital staff and a large dining area for visitors. Each year, she submits to her supervisor an annual labour expense budget broken down by month for each of her two departments.

On June 1, and after 4 months of consideration and planning, Sofia and her staff were excited to implement a new public cafeteria menu. The response from hospital visitors was excellent. The dining room staff reported that there were many positive comments about the foods selected for the new menu, and the production staff reported a 25 percent increase in the amount of food prepared for cafeteria service. Sofia had only budgeted for a 5 percent sales increase because of the new menu, so she was very happy.

On July 7, when Sofia's assistant, Jason, brought her the financial reports for the month of June, he was concerned. "I think we are in big trouble, Boss," he said. "We spent a lot more on cafeteria labour last month than we budgeted!"

Question

1. What do you think is the cause of Sofia's labour budget overage in the cafeteria?
2. Do you think that going "over" budget in this situation is a good thing or a bad thing? Why?
3. If you were Sofia, would you reexamine your cafeteria labour budget for future operating periods? Why or why not?