Question: Karen Brady, the general manager of the Curbside Motor Lodge in Central England, has approached you for advice in connection with her most recently quarterly performance report. The summarized version of the report is as follows:
The lodge has produced this type of quarterly internal financial report for several years now. Karen has heard that some hospitality businesses are using flexible budgeting, a technique that she has not encountered before in her career. She is wondering what insights can derive from preparing flexible budgets and whether it is a technique that she should introduce at the lodge.
Required
(a) Prepare a flexible budget for the Curbside Motor Lodge for the quarter ending 30 September 20X1. Also record all flexible budget variances, and indicate whether they are favourable or unfavourable.
(b) In connection with the flexible budget performance report you have prepared for the Curbside Motor Lodge, prepare a brief statement for Karen Brady that summarizes the benefits of flexible budgeting.