Problem 8-19A Attaining notfonpmt 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, Moll);r 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 Page 379 one to hold more than 1,600 people is $1,500. 4. A xed amount was designated for printing, decorations, the speaker's gift, and publicity. 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 xed 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 x $14.50) 20.300 Postage {3.000 x $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 (decit) $ 0 Actual 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 x $15.50) 25,110 Postage {4.000 X $0.49) 1,960 Fixed costs Facility 1,500 Printing 950 Decorations 840 Speaker's gitt 130 Publicity 600 Total expenses 31,090 Budget decit $ (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-thanexpected 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