Question

Problem 24 The Hovious Inn is struggling to understand its unfavorable budget variance for cleaning rooms. The data are as follows: Time to Clean Hourly Wage Rooms' Sales a Room Rates Total Budget 1,000 30 minutes $12.00 $6,000.00 Actual 1,100 32 minutes $12.10 7,098.67 Required: 1. Determine the budget variance. 2. Determine the volume variance.

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Answer 1

1. Budget Variance = Bugdeted Cost - Actual Cost =$6,000 - $7,098.67 $(1,098.67) Unfavourable Www = (Budgeted Volume - Actual Volume) *Budgeted Rate 2. Volume Variance Budgeted Rooms Sales Actual Rooms' Sales Hourly Rate Budgeted Time per room Budgeted Rate/ room 1000 1100 $ 12.00 30 mins =12/60*30 $ 6.00 Volume Variance =(1000-1100) *6 $ (600.00) Unfavourable AMMAS

3. Rate Variance = ( Standard Rate - Actual Rate) * Actual Quantity - Standard Actual Rate per Hou Time Regd Rate per Room 12 30 mins =12/60*30 $ 12 32 mins =12/60*32 $ 6.00 6.40 uby Actual Rooms Sales 1100 Rate Variance = (6.0 - 6.4)*1100 $ (440.00) Unfavourable 1 11

4. Efficiency Variance = ( Standard Hours for Actual Qty - Actual Hours for Actual Quantity) • Standard Rate per Hour CA L. Actual Rooms' Sales 1100 Standard time for 1 Room =30 mins Standard time for 1100 Room =1100-30/60 550 hours Actual time for 1 Room Actual time for 1100 Rooms =32 mins =110032/60 586.67 hours . . Standard Rate per hour $ 12.00 litiu Eficiency Variance = (500-586.67)*12.00 $ (440.00) Unfavourable 15. Overall, the management is weak as the actual time taken is more than standard even after the pay rate being more than standard.