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 $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 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. 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. is equal to Master Budget $25,290 Flexible Budget $25,290 Volume Variance $0 NONE 20300 1470 (1620S14.50)=23490 (4000*0.49)= 1960 (23490-20300)= 3190 (1960-1470)= 490 U U Allocated funds Expenses Variable expenses Meals Postage Fixed expenses Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus (deficit) 1500 (1500-1000)= 500 1000 950 840 130 600 25290 $0 950 840 130 600 29470 -S4 180 0 0 0 0 4180 4180 U NONE NONE NONE NONE U U is equal to Flexible Budget $25,290 Actual Results $25,290 Flexible Variances $0 NONE (1620-$14.50)=23490 (4000*$0.49)= 1960 25110 1960 (25110-23490)= 1620 0 U NONE Allocated funds Expenses Variable expenses Meals Postage Fixed expenses Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus (deficit) 1500 950 840 130 600 29470 -$4,180 1500 950 840 130 600 31090 -$5 800 0 0 0 0 0 1620 $1,620 NONE NONE NONE NONE NONE U U