Taylor gradually increased the amount she was charging her neighbors for the meal delivery service and began working with a non-profit organization to provide more meals to families in need.
Taylor ran the pilot project for four months. Although one neighbor had to drop out after the first month due to a family emergency, several others heard about it and wanted in on the system. The goal of the pilot had been to test the viability of the business idea and work out some of the kinks in the recipes. Of course, once Taylor starts to invest even more time and money in the business, including hiring employees and expanding to a nearby facility, the business will need to do more than just cover the cost of the meals. Taylor wants to turn it into a profitable business that serves a greater purpose.
Providing meals to local families was personally rewarding to Taylor, and it also made her customers feel that they were doing something good. Taylor has read about other socially responsible companies that manage to “do good while doing well.” Taylor would like to focus on families with young children as she knows how critical a stable and nutritious food supply is during their formative years. Taylor’s goal is to donate one meal for every meal sold to a paying customer.
Taylor has decided to name her business Bene Petit. It sounds like bon appétit (enjoy your meal), but bene means “good” and petit means “small.” 3
The mission of Bene Petit is to provide delicious and nutritious meals to families with young children and to contribute to society through small acts of kindness.

Part 4: Planning and Control
In part 4 of the case, students will help Taylor create an operating budget for Bene Petit’s second year of operations, including the following.
• Sales budget broken down by meal size.
• Direct materials (ingredient) purchases budget
• Direct labor budget
• Manufacturing overhead budget
• Selling and administrative expense budget
• Pro-forma income statement
Students will then perform a comprehensive variance analysis to reconcile the difference in actual and budgeted results, including the following variances:
• Total budget variance
• Flexible budget volume variance
• Sales price variance
• Direct materials (ingredients) price variance
• Direct materials (ingredients) usage variance
• Direct labor rate variance
• Direct labor efficiency variance
• Variable manufacturing overhead budget variance
• Fixed manufacturing overhead budget variance
• Selling and administrative expense budget variance
More specific requirements and data for each scenario are provided in the teaching note.

Part 4: Budgeting and Variance Analysis
Assume Bene Petit is in its 3rd year of operations and is on track to report a small profit during Year 3, after barely breaking even in Year 2. For this assignment, you will help Taylor budget for Bene Petit’s operations in Year 4 so that she can plan for operating expenditures and determine how much (if any) profit she can withdraw from the business or reinvest to fuel future growth.
Based on the upward trend in Bene Petit’s sales over the first three years, industry estimates of growth in the meal-preparation service sector, and Taylor’s plans to invest more heavily in online advertising to expand Bene Petit’s customer base, Taylor has estimated Bene Petit’s production and sales for each quarter of Year 4 as follows:

Other operating plans include the following:
Pricing
• The retail price for customer meals is $6.00 per serving. However, after promotional discounts and other advertising promotions are factored in, Taylor estimates that her average sales price will be $5.00 per serving in Year 4.
Manufacturing Costs (Customer Meals only)
• Customer meals are produced “just in time” for delivery to the customer, so there is no Finished Goods Inventory.
• Purchases of raw materials (ingredients) are based on the number of servings in each meal (single = 1 serving, dual = 2 servings, family = 4 servings). Each serving should require about ½ pound of raw ingredients at an average standard cost of $2.00 per pound. Bene Petit maintains a small inventory of staple ingredients equal to 2% of the next quarter’s production needs. Assume Bene Petit will have 200 pounds of raw material on hand at the beginning and end of Year 4.
• Direct labor wages vary with the number of customer meals, regardless of serving size. Each worker can make and package about 25 customer meals per hour and the average labor rate (including taxes and benefits) is $20 per direct hour.
• Variable production overhead costs (for power, packaging materials, etc.) are applied at a rate equal to 50% of direct labor.

Transcribed Image Text:

Single Serve Meals Dual Serve Meals Family Sized Meals Total Customer Meals Total Donated Meals Quarter 1 750 1,250 3.000 5,000 5,000 Quarter 2 900 1,500 3.600 6,000 6,000 Quarter 3 975 1,625 3.900 6,500 6,500 Quarter 4 1,125 1,875 4,500 7,500 7,500 Total 3,750 6,250 15.000 25,000 25,000 Single Serve Meals Dual Serve Meals Family Sized Meals Total Customer Meals Total Donated Meals Quarter 1 750 1,250 3.000 5,000 5,000 Quarter 2 900 1,500 3.600 6,000 6,000 Quarter 3 975 1,625 3.900 6,500 6,500 Quarter 4 1,125 1,875 4,500 7,500 7,500 Total 3,750 6,250 15.000 25,000 25,000

Answer rating: 100% (QA)

Answer 1 Sales Budget In line with Taylors goal of providing meals to families with young children and committing to donate one meal for every meal sold to a paying customer Bene Petits sales budget f... View the full answer