WRC 7. Watson Walbert has been the executhe chef at the Alina Restaurant for five years. Altina Restaurant is located in a dry area (alcoholic beverage les are illegal). so it only sell food. In the last five years, Watson has worked for Several general manager. The new general manager, however, is a real sticker for staying in budget, and at the moment Watson is a bit worried. According to the November's spreadsheet the general manager sent Watson, he had exceeded his food co budget significantly. He felt that his team had performed well , but according to the memo he got from the owner, he still had to explain his department's sub-par" performance to the owner in person. Watson is confused, though. Although he spent more in food cost, he also sold more coven, so his food cost should be higher than originally budgeted! Watson decides to calculate a flexible budget based on his actual number of covers sold to see if he has, indeed, had cost control problems in any of his line items, especially food cost. Help him calco late his flexible budget, and then answer the questions that follow Altina Restaurant Flexible Budget for November November original budget November original budget check number of covers 18.000 $9.00 average November actual number of covers 21,000 $ November actual check average Variable Dollars Per Cover Original Budget 18.000 Flexible Budget 21.000 Variance Favorable Unfavorable Actual 21.000 NUMBER OF COVERS Sales: Food $9.00 $162,000 $ $200,000 $ $3.12 $1.25 $56,160 $22,500 $ $ $60,500 $22.000 $ $ LESS VARIABLE COSTS Food Cost Management, Staff, and Benefits Telephone Marketing Utilities Repairs and Maintenance Contribution Margin $0.02 $0.08 $0.14 $0.11 $1.28 $360 $1.440 $2.520 $ $ $ $ $ $575 $1.750 $2,500 $2,600 $110,075 $ $ $ $ $ $1,980 $77,040 $28,800 $28,800 $28,800 0 0 0 LESS FIXED COSTS Management, Staff, and Benefits Telephone Marketing Utilities Repairs and Maintenance Administrative and General Depreciation Occupancy Costs 0 $360 $5,400 $3,600 $150 $2,000 $1,000 $5,000 $360 $5,000 $3.600 $150 $2.000 $1,000 $5,000 $360 $5.400 $3,600 $150 $2.000 $1,000 $5,000 0 0 0 0 INCOME BEFORE TAXES $30,730 $ $63,765 Tax Rate $ 40% $12,292 $ $25,506 5 NET INCOME $18,438 $ $38,259 $ a. What was Watson's actual check average? Was this higher or lower than the original budget and flexible budget check average? b. Were Watson's actual food sales higher or lower than the flexible budget? By how much? Was this favorable or unfavorable? c. Was Watson's actual food cost higher or lower than the original budget? Why do you think this is so d. Was Watson's actual food cost higher or lower than the flexible budget By how much? Was this favorable or unfavorable? How can Watson use this information in his report to the owner? c. Were Watson's variable management, staff, and benefits higher or lower than the original budget? 1. Were Watson's variable management, staff, and benefits higher or lower than the flexible budget By looking a both the original budget and the flexible budget, what conclusion can you draw about Watson's ability to control his labor costs? 5. Was Watson's actual net income higher or lower than the flexible budget By how much? Was this favorable or unfavorable h. Overall, how do you think Watson is doing at meeting the budget goals set by the operation's owner? How should he respond to the owner's initial claim that his department is operating at a sub-par" performance level? Fanie. Nalewe