Harralds Fish House is a family-owned restaurant that specializes in Scandinavian-style seafood. Data concerning

the restaurants monthly revenues and costs appear below (q refers to the number of meals served):

Formula

Revenue .............................................. $16.50q

Cost of ingredients .............................. $6.25q

Wages and salaries ............................ $10,400

Utilities ................................................ $800 + $0.20q

Rent .................................................... $2,200

Miscellaneous ..................................... $600 + $0.80q

Required:

1. Prepare the restaurants planning budget for April assuming that 1,800 meals are served, what is the net operating income?

2. Assume that 1,700 meals were actually served in April. Prepare a flexible budget for this level of activity, what is the net operating income, is it 2000. True or False?

The actual results for April appear below

Revenue ...................................................... $27,920

Cost of ingredients ....................................... $11,110

Wages and salaries ..................................... $10,130

Utilities ......................................................... $1,080

Rent ............................................................. $2,200

Miscellaneous .............................................. $2,240

3. What is the activity variances for net operating income?

4. What is the revenue and spending variances for net operating income?

5. Is the revenue and spending variances for net operating income Favorable. True or False?