Question

The downtown hotel has 105 guest rooms, a budgeted annual occupancy rate of 79%, a budgeted average daily room rate of $265.00, a budgeted average RevPAR of $209.00, and a budgeted variable housekeeping cost of $14.22 per room. Actual data indicated the annual occupancy rate was 85%, actual average daily room rate 85%, actual RevPAR was $236.51, and actual housekeeping costs were $14.93 per room. Answer the following about the housekeeping costs.

1) What was the Annual budget variance? Is it favorable or unfavorable?

2) What is the Annual cost variance? Is it favorable or unfavorable?

3) What is the Annual quantity volume variance? Is it favorable or unfavorable?

A.

1) Annual Budget Variance: $55,858.69, Unfavorable

2) Annual Cost Variance: $23,160.92, Unfavorable

3) Annual Quantity Variance: $32,697.77, Unfavorable

B.

1) Annual Budget Variance: $36,597.19, Unfavorable

2) Annual Cost Variance: $2,264.45, Unfavorable

3) Annual Quantity Variance: $34,332.66, Unfavorable

C.

1) Annual Budget Variance: $11,171.74, Favorable

2) Annual Cost Variance: $21,265.03, Unfavora

3) Annual Quantity Variance: $32,697.77, Favorable

Answer 1

Solution 1:

Budgeted variable housekeeping cost = 105*79%*365*$14.22 = $430,535.39

Actual variable housekeeping cost = 105*85% * 365*$14.93 = $486,363.41

Annual budget variance = Budgeted cost - Actual cost = $430,535.39 - $486,363.41 = $55,828.02 Unfavorable

Solution 2:

Actual occupancy for the year = 105*85%*365 = 32576.25

Annual cost variance = (Budgeted variable cost per room - Actual variable cost per room) * Actual occupancy = ($14.22 - $14.93) * 32576.25 = $23,129.14 Unfavorable

Solution 3:

Budgeted occupancy for the year = 105*79%*365 = 30276.75

Actual occupancy for the year = 105*85%*365 = 32576.25

Annual quantity variance = (Budgeted occupancy - Actual occupancy) * Budgeted variable cost per room

= (30276.75 - 32576.25) * $14.22 = $32,698.89 unfavorable