Danielle Augusta Is the Long-Time Catering Director of Windamere, a Hotel

question 4

Essay

Danielle Augusta is the long-time catering director of Windamere, a hotel noted throughout the industry for quality, profitability, and cost control. The hotel recently catered a steak dinner for a 2,000-person convention. Strict standards were in place for the dinner: 0.75 pounds of beef per plate at $9 per pound. A review of the accounting records shortly after the convention showed that 1,680 pounds of beef were purchased and consumed, costing the hotel $13,440.
Required:
A. Calculate the cost of beef budgeted for the dinner and the total beef variance (i.e., the difference between budgeted and actual cost). Should this variance be of concern to the hotel? Why?
B. Assess the job that Augusta did in "managing" the beef purchase by performing a variance analysis. Comment on your findings.
C. Assume that the hotel received a number of complaints shortly after the dinner concluded. Explain a possible reason behind the conventioneers' unhappiness.

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Definitions:

Short-Run Aggregate Supply

A curve that shows the relationship in the short term between the price level and the quantity of output provided by firms when some input prices, especially wages, are fixed.

Sticky-Wage Theory

A hypothesis that wages are slow to adjust to the economic conditions, leading to potential unemployment or labor market imbalances.

Natural Rate

An economic theory concept referring to the level of any economic variable that is expected to prevail in the long term under natural conditions, without external influences.

Inflation Rate

The speed at which the average price level of goods and services increases, leading to a decrease in buying power.