Subs Catering operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility. Subman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,425,000 meals a year. In 2020, based on estimates from sach hospital controller, Subman budgeted for 950,000 meals a year. Budgeted fixed costs in 2020 were $1,539,000. Each hospital was charged $6.12 per meal $4.50 variable costs plus 51.62 allocated budgeted fixed cost. (Click the icon for additional information.) (Click the icon for additional data.) . In 2021, only 712,500 Subman meals were produced and sold to the hospitals. Wright suspects that hospital controllers had systematically inflated their 2021 meal estimates. Read the requirements, Requirement 1. Recall that Subman uses the master budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Subman's operating income in 2021? Deterrnine the formula, then compute the effect of production-volume variance on Subman operating income in 2021. (Abbreviation used: Bud. = Budgeted.) Fixed cost allocated using master-budget capacity Production -( volume variance Requirements 1 = 1. 2. 3. Recall that Subman uses the master budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Subman's operating income in 20217 Why might hospital controllers deliberately overestimate their future meal counts? What other evidence should Subs Catering's president seek to investigate Wright's concerns? Suggest two specific steps that Wright might take to reduce hospital controllers' incentives to inflate their estimated mcal counts 4. Print Done X More info Reference 2020 Master Practical 2021 Master Recently, the hospitals have been complaining about the quality of Subman's meals and their rising costs. In mid-2020, Subs Catering's president announces that all Subs Catering hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality-certified services from outside the system. Alvin Wright, Subman's controller, is preparing the 2021 budget. He hears that three hospitals have decided to use outside suppliers for their meals, which will reduce the 2021 estimated demand to 810,000 meals. No change in variable cost per meal or total fixed costs is expected in 2021. Budget Budget 1.62 Capacity 1.08 Budgeted fixed costs per meal $ S $ $ 1.90 Check answer Subs Catering operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility. Subman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,425,000 meals a year. In 2020, based on estimates from sach hospital controller, Subman budgeted for 950,000 meals a year. Budgeted fixed costs in 2020 were $1,539,000. Each hospital was charged $6.12 per meal $4.50 variable costs plus 51.62 allocated budgeted fixed cost. (Click the icon for additional information.) (Click the icon for additional data.) . In 2021, only 712,500 Subman meals were produced and sold to the hospitals. Wright suspects that hospital controllers had systematically inflated their 2021 meal estimates. Read the requirements, Requirement 1. Recall that Subman uses the master budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Subman's operating income in 2021? Deterrnine the formula, then compute the effect of production-volume variance on Subman operating income in 2021. (Abbreviation used: Bud. = Budgeted.) Fixed cost allocated using master-budget capacity Production -( volume variance Requirements 1 = 1. 2. 3. Recall that Subman uses the master budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Subman's operating income in 20217 Why might hospital controllers deliberately overestimate their future meal counts? What other evidence should Subs Catering's president seek to investigate Wright's concerns? Suggest two specific steps that Wright might take to reduce hospital controllers' incentives to inflate their estimated mcal counts 4. Print Done X More info Reference 2020 Master Practical 2021 Master Recently, the hospitals have been complaining about the quality of Subman's meals and their rising costs. In mid-2020, Subs Catering's president announces that all Subs Catering hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality-certified services from outside the system. Alvin Wright, Subman's controller, is preparing the 2021 budget. He hears that three hospitals have decided to use outside suppliers for their meals, which will reduce the 2021 estimated demand to 810,000 meals. No change in variable cost per meal or total fixed costs is expected in 2021. Budget Budget 1.62 Capacity 1.08 Budgeted fixed costs per meal $ S $ $ 1.90 Check
