1. Summarize the results of the volume and cost variances computations based on the comparison between the static budget, the flexible budget, and actual costs.
2. Explain the favorable or unfavorable budget variances.
3. Since this is a not-for-profit organization, address why anyone should be concerned with meeting the budget.
4. Make recommendations for what can be done differently to stay on budget for future luncheons. Provide specific examples to support your recommendations.

The Redmond Management Association held its annual public relations luncheon in April Year 2. Based on the previous year's results, the organization allocated $2 5,290 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 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. 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.Master Budget Flexible Budget is equal to Volume Variance Allocated funds $25,290 $25,290 $0 NONE Expenses: Variable expenses: Meals 20300 (1620*$14.50)= 23490 (23490-20300)= 3190 C Postage 1470 (4000*$0.49)= 1960 (1960-1470)= 490 U Fixed expenses Facility 1000 1500 (1500-1000)= 500 U Printing 950 950 NONE Decorations 840 840 NONE Speaker's gift 130 130 NONE Publicity 600 600 NONE Total expenses 25290 29470 4180 U Surplus (deficit) SO $4,180 4180 U Flexible Budget Actual Results is equal to Flexible Variances Allocated funds $25,290 $25,290 $0 NONE Expenses Variable expenses: Meals (1620*$14.50)= 23490 25110 (25110-23490)= 1620 U Postage (4000*$0.49)= 1960 1960 0 NONE Fixed expenses Facility 1500 1500 NONE Printing 950 950 NONE Decorations 840 840 NONE Speaker's gift 130 130 NONE Publicity 600 600 NONE Total expenses 29470 31090 1620 U Surplus (deficit) -$4,180 -$5,800 $1,620 U