Jennifer Norton is the Registered Dietitian (R.D.) responsible for all dietary services at City Memorial Hospital. Her operation consists of two departments. The first, and largest, is patient feeding. It consists of the tray line staff and the majority of her food production staff. The second department is the public cafeteria, which includes special dining areas for staff and a large dining area for patient visitors. Annually, on January 1, she submits to her supervisor an annual labor expense budget broken down by month for each department.

In June, and after four months of consideration and planning, Jennifer and her staff were excited to implement a new cafeteria menu. The response from the public was excellent. The dining room staff reported that there were many positive comments about the food selected for the new menu, and the production staff reported a 25% increase in the amount of food prepared for cafeteria service.

On July 7, when Jennifer€™s assistant, Joe, brought her the financial reports for the month of June, he was quite agitated. €œI think we are in trouble Boss,€ he said. €œAs I read the reports, we were over our labor budget by more than $3,000 last month! How did that happen?€

Jennifer reviewed the labor portion of the budget and found the following:

1. What do you think is the cause of Jennifer€™s labor budget overages? How would you determine if you are correct?
2. Jennifer needs to supply her supervisor with an analysis of the labor budget variance she has incurred in each of her two operating units. Compute the variances from budget for her in both dollar amount and percentage. What other data might Jennifer wish to include in her report?

3. Assume that Jennifer came to you and asked how she could determine whether the increased dollars spent on labor in the public cafeteria were expended efficiently. What specific steps would you suggest she take to help find an accurate answer to that question?

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June Budget ($) 23,750 June Actual ($) Patient labor 23,824 Cafeteria labor 16,500 19,850 June Budget ($) 23,750 June Actual ($) Variance ($) Variance (%) 23,824 Patient labor Cafeteria labor 16,500 19,850