Eventissimo, an event planning firm (great name, hunh? Made it up myself!), has created a budget for a large charitable dinner event they are planning, as follows:

Revenue (1000 guests @ $95 per ticket).. $ 95,000

Expenses:

Variable:

Food (1000 guests @ $55) $ 55,000

Party gifts (1000 guests @ $7) 7,000

Floral Centrepieces (100 tables @ $18).. 1,800

Chair covers (1000 guests @ $6).. 6,000

Contribution Margin........ 25,200

Fixed:

Event planning fee 3,000

Room Rental. 2,500

Security. 1,200

Sound System Rental 3,600

Room dcor... 2,100

Door prizes 800 13,200

Net Profit for charity...... $ 12,000

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But in reality, it turns out that due to poor publicity and bad weather on the day of the event, only 750 people attend the event. Actual results follow below, in the middle numeric column of the table.

Required:

a. What kind of budget is prepared at an activity level different from the original level? (i.e., what do we call this kind of budget?) (3 marks)

b. Please prepare a budget assuming 750 attendees, and place it in the first numeric column below. (7 marks)

c. Compute the variance for each budget item, showing these in the last numeric column below. Please be sure that each variance is followed by its appropriate letter. (7 marks)

Budget @ 750 Actual Variance Variance

Revenue $ 71,250

Food 43,500

Party Gifts 5,000

Centrepieces 1,480

Chair Covers 4,920

Contribution Margin 16,350

Event Planning Fee 3,500

Room rental 3,200

Security 1,600

Sound System rental 3,500

Room dcor 1,800

Door prizes 800

Net Profit $ 1,950

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d. List three variances that you think should be investigated.