3. Bill Smith is the dining room manager of the Cycle Club. The wages budget for

Question

3. Bill Smith is the dining room manager of the Cycle Club. The wages budget for his department is divided between fixed and variable expenses. The work standard for servers is to serve 10 meals per hour. The average wage rate per hour is $12.00. The variable wages budget for servers for the first week of February is $4,800 based on $12.00 per hour. Given the work standard, this is also based on serving 4,000 people. During the first week of February, the server wages totaled $5,200. During the first week of February, the average hourly pay was $11.50 per hour. In addition, 4,200 members were provided service by the servers. Required: a. Determine the budget variance for server variable wage expense. b. Is the budget variance determined in #1 significant? Explain. c. Rate Bill Smith’s performance in managing the servers. Support your discussion with specific numbers from related variance analyses (rate variance and efficiency variance). 3. Bill Smith is the dining room manager of the Cycle Club. The wages budget for his department is divided between fixed and variable expenses. The work standard for servers is to serve 10 meals per hour. The average wage rate per hour is $12.00. The variable wages budget for servers for the first week of February is $4,800 based on $12.00 per hour. Given the work standard, this is also based on serving 4,000 people. During the first week of February, the server wages totaled $5,200. During the first week of February, the average hourly pay was $11.50 per hour. In addition, 4,200 members were provided service by the servers. Required: a. Determine the budget variance for server variable wage expense. b. Is the budget variance determined in #1 significant? Explain. c. Rate Bill Smith’s performance in managing the servers. Support your discussion with specific numbers from related variance analyses (rate variance and efficiency variance). 3. Bill Smith is the dining room manager of the Cycle Club. The wages budget for his department is divided between fixed and variable expenses. The work standard for servers is to serve 10 meals per hour. The average wage rate per hour is $12.00. The variable wages budget for servers for the first week of February is $4,800 based on $12.00 per hour. Given the work standard, this is also based on serving 4,000 people. During the first week of February, the server wages totaled $5,200. During the first week of February, the average hourly pay was $11.50 per hour. In addition, 4,200 members were provided service by the servers. Required: a. Determine the budget variance for server variable wage expense. b. Is the budget variance determined in #1 significant? Explain. c. Rate Bill Smith’s performance in managing the servers. Support your discussion with specific numbers from related variance analyses (rate variance and efficiency variance).

Explanation / Answer

a. Computation of Budget variance for server variable wage expense Particular Amount Actual Variable Expenses for Server Wages $5,200 Budgeted Variable Expense for Server Wages 4800 Server Variable wages Variance ( Budgeted Expense- Actual Expense) ($400) Hence, Server Variable Wages Variance is Unfavourable b. No budget variance compares only with the static budget.A flexible budget report also also be prepared and the varaince should be checked. Flexible Budget spends is 4,800/4,000*4,200=5,040 Actual spends is $5,200 So variance should be $160 c. Bill smith is performing not very well.As there is difference of $160 in the actual and the flexible budget spend so we can say that bill smith is 5% below in performance.

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