Use the following information to answer the next two questions. The BlueGum Hotel predicted $12,000 in variable labour costs and room revenue of $220,000 from 2,000 room sales in its static budget for January. The hotel actually sold 1,800 rooms and incurred $10,000 in variable labour costs in January
-What is the BlueGum hotel's flexible budget variance for labour variable costs in January?

Question

Quizplus · Accepted Answer

The flexible budget for variable labour costs would adjust the original budget of $12,000 based on the actual room sales. With 1,800 rooms sold out of the expected 2,000, the hotel would have expected to incur 90% (1,800/2,000) of its variable labour costs, which is $10,800 ($12,000 * 90%). Since the hotel only incurred $10,000, the variance is $800 ($10,800 - $10,000) favourable, as they spent less than expected.

Use the Following Information to Answer the Next Two Questions