The coffee bar in The Red Lion Hotel has always proved popular but has never made the expected level of profit. Complete the following variance analysis to identify and quantify the various causes of this profit shortfall.

The Red Lion Hotel knows how much a cup of coffee should cost to make (i.e. the 'standard cost') based on the following assumptions:-

• Arabica Coffee beans being purchased at 3.50 per Kg
• 1 kg of coffee beans making 40 cups of coffee
• A coffee barista being able to make 10 coffees per hour, and being paid 7.50 per hour
• Each cup of coffee incurring variable overheads of 0.04 (paper napkin, milk & sugar)

The hotel has a standard selling price of 2.00 for a cup of coffee

In the month of June, the hotel is budgeted to sell 5,000 cups of coffee at a standard selling price of 2.00 each. (b) Complete the "Original Budget" column in the following table to calculate the budget profit contribution that sales of coffee should make in June. Brief workings should be included in the table where appropriate. Red Lion Hotel - Total coffee sales for the month of June Original Budget Flexed Budget Actual Results Variances Sales Revenue Sales Price Variance