BUDGETED(100% capacity)	ACTUAL(45% capacity)
Revenue: food/beverages	750000/265000	337500/119250
Less: Cost of sales
food/beverages	300000/79500	165000/46780
gross profit	635000	244970
Less: operating cost
salaries	70000	38770
rent	6700	6700
miscellaneous	20000	10100
interest	18200	18200
advertising	10000	6600
Net profit	510100	164600

1. The cost of sales is variable and is budgeted in the following manner:
40% of sales revenue is spent on food.
30 percent of sales revenue for beverages
Throughout the year, the restaurant is supposed to grow revenue while maintaining its costs.

2. The restaurant is housed in a shop lot that has been rented since its launch. Since then, the rent has been paid in a consistent sum. Interest and charges will be accrued on a continuous basis during the year of operation.
3. Salaries and perks are a cost that is semi-variable. Salaries for administrative employees are set in stone. Throughout the year, all administrations are expected to continue working. Benefits include meals and uniforms for operating workers, and they are regarded a variable expense that will be charged in proportion to capacity utilisation.
Salaries for the kitchen workers will be determined by how much of the restaurant's capacity is used. The following is how the cost is budgeted

salaries-admin staff	15000
salaries-operation staff	30000
benefits-operation staff	25000
	70000

4. Miscellaneous costs include the costs of the following items:
a) Disposable things like paper, to-go containers and utensils, food storage items, and tablecloths.
b) Replenishment of dishes, linens, glassware, and utensils that have been broken.
b) Whenever menus are modified, reprinting them.
d) Fees for Internet connection or lease related with point-of-sale systems.
For budgeting purposes, 30% of total miscellaneous is deemed fixed and will remain constant regardless of capacity used, while the balance will be charged in proportion to capacity used.
5. The cost of advertising and marketing is a fixed expense that is determined by the level of restaurant capacity utilisation. The cost will remain constant at RM6,500 for any usage below 50%.

i) Prepare a performance report for the year ended December 31, 2020, and evaluate the company's overall performance (display all workings).

ii) As requested, suggest a budgeting strategy that is appropriate when future occurrences are unpredictable. Explain TWO (2) advantages in relation with company, as well as why that particular technique was chosen.

iii) At yesterday's board meeting, the Operations Manager indicated that restaurant managers had complained about not being able to participate in the budgeting process, which had resulted in disagreements. Determine how these issues could be resolved.

ⅳ) Explain the THREE (3) approaches that can be used to set material standards.

ⅴ) Explain why a favourable material price variance does not always imply superior performance.

Answer rating: 100% (QA)

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