P23-35. Flexible Budgets and Performance Evaluation Kathy Vanderbosch, supervisor of housecleaning for Hotel Valhalla, was surprised by her summary performance report for March given below. HOTEL VALHALLA Housekeeping Performance Report For the Month of March Budget Variance $252,000 $8,708 U Actual $260,708 %Variance 3.456% U Kathy was disappointed. She thought she had done a good job controlling housekeeping labor and towel usage, but her performance report revealed an unfavorable variance of $8,708. She had been hoping for a bonus for her good work, but now expected a series of questions from her manager. The cost budget for housekeeping is based on standard costs. At the beginning of a month, Kathy receives a report from Hotel Valhalla's Sales Department outlining the planned room activity for the month. Kathy then schedules labor and purchases using this information. The budget for the housekeeping was based on 8,000 room nights. Each room night is budgeted based on the following standards for various materials, labor, and overhead: Shower supplies.... 4 bottles @ $0.50 each Towels... 1 @ $4.00 Laundry 8 lbs. @ $0.25 a lb. Labor 44 hour @ $15.00 an hour VOH $3.00 per labor hour FOH $10 a room night (based on 8,000 room nights) "Replacements for towels evaluated by housekeeping as inappropriate for cleaning and reuse. With 8,600 room nights sold, actual costs and usage for housekeeping during April were $14,620 for 36,550 bottles of shower supplies. $32,121 for 7,740 towels. $20,898 for 69,660 lbs. of laundry. $91,504 for 6,020 labor hours. $19,565 in total VOH. $82,000 in FOH. Required a. Develop a complete budget column for the above performance report presented to Kathy. Break it down by expense category. The following format, with additional lines for expense categories, is suggested: Budget Variance Account Shower Supplies... : Total Actual $ 14,620 ? ? $260,708 $252,000 $8,708 U b. Evaluate the usefulness of the cost center performance report presented to Kathy. c. Prepare a more logical performance report where standard allowed is based on actual output. Also, split each variance into its price/rate/spending and quantity/efficiency components (except fixed of course). The following format, with additional lines for expense categories, is suggested: Account Actual Shower Supplies......... $ 14,620 Flexible Budget ? Total Variance ? Price/Rate! Quantityi Spending Efficiency Variance Variance ? ? Total .. $260,708 ? ? d. Explain to Kathy's boss what your report suggests about Kathy's department performance. e. Identify additional nonfinancial performance measures management might consider when evaluat- ing the performance of the housekeeping department and Kathy as a manager
