li 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 lunchcon. 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 to Page 379 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 REDMOND MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Operating funds allocated $25,290 Expenses Variable costs 20,300 Meals (1,400 $14.50) Postage (3,000 $0.49) 1,470 Fixed costs Facility 1,000 Printing 950 Decorations 840 130 Speaker's gift Publicity 600 Total expenses 25,290 $ Budget surplus (deficit) Actual results for the luncheon follow III Actual results for the luncheon follow. REDMOND MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April Year 2 $25,290 Operating funds allocated Expenses Variable costs 25,110 Meals (1,620 * $15.50) 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) O & https://playetumheducation.com/pub 17dtopub1626942306[data-uuid dica385161499Sb22af7c18be2data- a 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 Ms. 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