The following situations are independent of each other:

Situation 1:

A hotel had budgeted an occupancy of 18,000 rooms with a variable housekeeping cost of $11 per room. Actual data indicated that a total of 18,600 rooms were sold at an actual cost of housekeeping of $12.60 per room.

Situation 2:

A restaurant had a budgeted number of 600 customers for lunch meal. The budgeted selling price of lunch meal is $30.00 with a variable cost of $6.40 per meal. The lunch meal was actually sold to 760 customers at a selling price of $31 per meal with the variable cost of $6.60 per meal.

Required:

(a) For the housekeeping cost in Situation 1, calculate the following variances and indicate whether the variance is favourable or unfavourable:

(i) Budget variance

(ii) Cost variance

(iii) Qty volume variance

(b) For the lunch meal in Situation 2, calculate the following variances and indicate whether the variance is favourable or unfavourable:

(i) Budget variance

(ii) Sales (revenue) variance

(iii) Sales (volume) variance

(c) Explain any TWO (2) purposes of preparing a budget.