Analyze Performance for a Restaurant
Doug’s Diner is planning to expand operations and is concerned that its reporting system might need improvement. The master budget income statement for the Downtown Doug’s, which contains a delicatessen and restaurant operation, follows (in thousands):
|
Delicatessen |
Restaurant |
Total |
Gross sales |
$1,000 |
$2,500 |
$3,500 |
|
|
|
|
Costs |
|
|
|
Purchases |
600 |
1,000 |
1,600 |
Hourly wages |
50 |
876 |
926 |
Franchise fee |
30 |
76 |
106 |
Advertising |
100 |
200 |
300 |
Utilities |
70 |
126 |
196 |
Depreciation |
50 |
76 |
126 |
Lease cost |
30 |
50 |
80 |
Salaries |
30 |
50 |
80 |
Total costs |
$ 960 |
$2,454 |
$3,414 |
Operating profit |
$ 40 |
$ 46 |
$ 86 |
The company uses the following performance report for management evaluation:
DOWNTOWN DOUG’S |
|||||
Net Income for the Year |
|||||
($000) |
|||||
Actual Results |
|||||
Actual Results |
Delicatessen |
Restaurant |
Total |
Budget |
Over or (Under ) Budgeta |
Gross sales |
1200 |
$2,000 |
$3,200 |
$3,500 |
$(300) |
Costs |
|||||
Purchases |
780 |
800 |
1,580 |
1,600 |
$ (20) |
Hourly wagesb |
60 |
700 |
760 |
926 |
(166) |
Franchise feeb |
36 |
60 |
96 |
106 |
(10) |
Advertising |
100 |
200 |
300 |
300 |
|
Utilitiesb |
76 |
100 |
176 |
196 |
(20) |
Depreciation |
50 |
76 |
126 |
126 |
|
Lease cost |
30 |
50 |
80 |
80 |
|
Salaries |
30 |
50 |
80 |
80 |
|
Total costs |
1162 |
$2,036 |
$3,198 |
$3,414 |
$(216) |
Operating profit |
38 |
$ (36) |
$ 2 |
$ 86 |
$ (84) |
Required
Prepare a profit variance analysis for the delicatessen segment.