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Pineview Meeting Centers is an office complex that hosts meetings for various charities, business and

not for profit organizations. Part of the meeting packages they sell include a buffet lunch. As a way to
try and control costs, the company put together these standard costs for a buffet.

Standard Quantity Standard Rate Standard Cost


Direct Materials (food) 5 KGs $ 2.00 /kg $ 10.00
Direct Labour 0.5 hours $ 12.00 /hr $ 6.00
Variable MOH 0.5 hours $ 3.00 /hr $ 1.50
$ 17.50

The month of June saw the following:

• 12,000 KGs of food was purchased at a cost of $28,000


• There was 2,000 KGs of food left at June 30th. There was no inventory at the start of the month.
• Pineview has 7 employees. The June details are as follows:

June actual wages


Name Hours Worked Pay
Jill 155 $ 1,898.75
Jack 176 $ 2,149.88
David 200 $ 2,450.00
Saeed 125 $ 1,531.25
Yousuf 166 $ 2,033.50
Meghan 146 $ 1,782.38
Sunny 153 $ 1,874.25
1,120 $ 13,720.00

• Direct Labour hours was selected as the cost driver for Variable Manufacturing Overhead.
During the month of June, the total V-MOH was $3,050
• During June, 2,100 buffets were served

1. For the Direct Materials (food costs), compute the price and quantity variances
a. Due to an existing labour shortage at their usual food supplier, the company used a new
supplier for the food in June. This new company is eager to enter into a long-term
purchase contract. Explain if the company should or shouldn’t enter into this new
contract
2. Compute the direct labour rate and efficiency variances
3. Compute the variable overhead spending and efficiency variances
The ownership at Pineridge Golf Course are elated with the results of the June Senior league. Net
income was up 60% more than the budget! They are considering giving the General Manager a
performance bonus for her efforts. Should they? Comment.

Pineridge Golf Course


Wednesday Senior league results (actual to Budget)
June, 2010
Budget Actual

Number of Guests 500 600

Revenue 48,000 58,000

Variable Costs

Staff 12,000 14,400

prizes 9,600 6,000

cart rental 8,000 12,000

Buffet 4,800 5,800

Total Variable Costs 34,400 38,200

Contribution Margin 13,600 19,800


Fixed Costs

course R&M 3,600 3,800

Total Fixed Costs 3,600 3,800

Total Costs 38,000 42,000

Net Income 10,000 16,000