Question

Pamela Cantu operates a school foodservice department in a small, rural community. She feeds approximately 1,300 students per day in three different locations. She receives an average of $1.28 in revenues per meal. Her budget, set at the beginning of the school year by the superintendent, is developed in such a way that a small amount is to be reserved for future equipment purchases and dining-room renovation. These funds are available, however, only if Pamela meets her budget. She hopes to use this year’s reserve (profit) to buy a $29,000 refrigerated salad bar for the high school. Because it is the midpoint of her school year, help her determine her “performance to budget” thus far (fill in all blanks).

Item	Budget	Actual	% of Budget
Meals Served	300,000	149,800	49.9%
Revenue
Food Expense	$170,000	$84,961	49.9%
Labor Expense	125,000	63,752	51.0%
Other Expense	60,000	31,460	52.4%
Total Expenses	$ 355,000	180,173	153.3%
Reserve

Assuming that the year is 50 percent completed and Pamela continues doing what she is doing, is she likely to meet the reserve requirement and thus be able to purchase the salad bar by the end of the year? If not, what changes should she make over the next six months to ensure that she will have the $29,000 in reserve?

Answer:

Answer 1

As per the table provided in the question the no of meals served until mid year is 149,800 which is 49.9% of the budgeted 3,00,000 meals. Each meals is billed at $1.28 so the revenue is no of meals served multiplied by the cost of each meal

so the total revenue budget and actual are as follows

Item	Budget	Actual	% of Budget
Revenue	$384000	$191744	49.9%

Total expense is $180173 so the difference between Revenue and expense is $11571.00

The current reserve is $11571 and the required reserve to by a refrigerated salad bar is $29000.

Item	Budget	Actual	% of Budget
Reserve	$29000	$11571.00	39.90%

The reserve (profit) is only 39.9 percentage of the expected reserve. If she has to be able to achieve the necessary reserve by end of this year, she will have to achieve 100% of meals delivered and also needs to reduce the labor expense which has exceeded the budget by 1% and other expenses which has exceeded the budget by 2.4%.