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B D E G H K M N O Expected Meal Cost $14.50 Expected Meal Cost $15.50 Facility Cost 1,601+ $1,500 Facility Cost 1600 or less $1,000 Facility Cost 1, 601+ $1,500 Facility Cost 1600 or less $10,000 Mailers 4,000 Mailers 4,000 Attendees 1620 Attendees 1620 Postage 0.49 Postage 0.49 Master Budget Flexible Budget Volume Variance F/U/None Master Budget Volume Variance F/U/None ALLOCATED FUNDS $25,290 $25,290 None ALLOCATED FUNDS $25,290 $25,290 None MEALS $20,300.00 23490 ($3,190.00) U MEALS $20,300.00 25110 ($4,810.00) U POSTAGE $1,470 1960 $490) U POSTAGE $1,470 1960 $490) C ACILITY $1,000 $1,500 ($500) U FACILITY $1,000 $1,500 ($500) U PRINTING $950 $950 None PRINTING $950 $950 None O O ECORATIONS 840 $840 0 None DECORATIONS $840 $840 None SPEAKERS GIFT $130 $130 None SPEAKERS GIFT $130 $130 None PUBLICITY $600 $600 None PUBLICITY $600 $600 None TOTAL EXPENSES $25,920 29,470 ($3,550) U TOTAL EXPENSES $25,920 31,090 ($5,170) U URPPLUS $0 -3,550 ($3,550) U SURPPLUS SO ($5,170) ($5,170) UofzvzF Units Standard Costs Actual Costs Formulas are in Blue Expected Attendance 1,730.00 12.90 15.50 Data entry points are Green Invitations Mailed 4,550.00 0.66 0.66 Facility Charge assuming increase in attendance 2,600.00 2,600.00 REDMOND MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Units X Standard Cost - Inormation Variance Master Budget only Flexible Budget (Flexible - Actual) Operating Funds Allocated 25,290.00 S 25,290.00 $ Expenses: Variable Costs Meals (1,400 X $12.90) 20,300.00 (1,730 X 12.90) 22,317.00 2,017.00 Unfavorable in v Postage (3,000 X $.66) 1,470.00 (4,550 X.66) 3,003.00 1,533.00 Unfavorable Fixed Costs Facility .. 1,000.00 2,600.00 1,600.00 Unfavorable Printing 950.00 950.00 Decorations 840.00 840.00 Speaker's Gift 130.00 130.00 publicity 600.00 600.00 Total Expenses 25,290.00 30,440.00 5,150.00 Unfavorable Budget Surplus or Deficit (5,150.00) $ (5,150.00) Unfavorable Units X Standard Cost - information Variance April Year 2 Flexible Budget only Actual Budget [ Actual - Flexible) Operating Funds Allocated $ 25,290.00 S 25,290.00 $ Expenses: Variable Costs Meals (1,730 X $12.90) 22,317.00 (1,730 X15.50) 26,660.00 $ 4,343.00 Unfavorable Postage (4,550 X $.66) 3,003.00 (4,550 X.66) 3,003.00 $ Fixed Costs Facility * *** 2,600.00 2,600.00 $ Printing 950.00 950.00 $ Decorations 840.00 840.00 Speaker's Gift 130.00 130.00 Publicity 600.00 600.00 $ Total Expenses 30,440.00 34,783.00 $ 4,343.00 Unfavorable Budget Surplus or Deficit (5,150.00) $ 9,493.00) $ (4,343.00) UnfavorableCHECK FIGURE b. Variance of surplus: $1,620 U Problem 8-19A Analyzing not-for profit entity variances The Redmond Management Association held its annual public relations luncheon in April Year 2. Based on the previous year's results, the organization allocated $25,290 of its operating budget to cover the cost of the luncheon. To ensure that costs would be appropriately controlled, Molly Hubbard, the treasurer, prepared the following budget for the Year 2 luncheon. The budget for the luncheon was based on the following expectations: 1. The meal cost per person was expected to be $14.50. The cost driver for meals was attendance, which was expected to be 1,400 individuals. 2. Postage was based on $0.49 per invitation and 3.000 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed 3. The facility charge is $1,000 for a room that will accommodate up to 1,600 people; the charge for one Page 379 to hold more than 1.600 people is $1.500. 4. A fixed amount was designated for printing. decorations, the speaker's gift, and publicity. REDMOND MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Operating funds allocated $25.290 Expenses Variable costs Meals (1,400 * $14.50) 20.300 Postage (3,000 * $0.49) 1,470 Fixed costs Facility 1.000 Printing 950 Decorations 840 Speaker's gift 130 Publicity 600 Total expenses 25.290 Budget surplus (deficit) 0Actual results for the luncheon follow. REDMOND MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April Year 2 Operating funds allocated $25.290 Expenses Variable costs Meals (1.620 * $15.50) 25,110 Postage (4,000 * $0.49) 1,960 Fixed costs Facility 1,500 Printing 950 Decorations 840 Speaker's gift 130 Publicity 600 Total expenses 31,090 Budget deficit $ (5.800) Reasons for the differences between the budgeted and actual data follow. 1. The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4.000 invitations were mailed. 2. Attendance was 1,620 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to $1,500. 3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $15.50 per person. 4. Printing. decorations, the speaker's gift, and publicity costs were as budgeted. Required a. Prepare a flexible budget and compute the sales and variable cost volume variances based on a comparison between the master budget and the flexible budget. b. Compute flexible budget variances by comparing the flexible budget with the actual results. Page 380 c. Mr. Snow was extremely upset with the budget deficit. He immediately called Ms. Hubbard to complain about the budget variance for the meal cost. He told Me. Hubbard that the added dessert caused the meal cost to be $4.810 ($25.110 - $20,300) over budget. He added. "I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next meeting of the budget committee. I want you to explain what happened." Assume that you are Ms. Hubbard. What would you tell the members of the budget committee? d. Since this is a not-for-profit organization, why should anyone be concerned with meeting the budget