The Adams Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $21,842 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 $11.90. The cost driver for meals was attendance, which was expected to be 1,410 individuals.

2. Postage was based on $0.46 per invitation and 3,050 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.

3. The facility charge is $1,100 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,600.

4. A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

ADAMS MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated	$	21,842
Expenses
Variable costs
Meals (1,410 $11.90)		16,779
Postage (3,050 0.46)		1,403
Fixed costs
Facility		1,100
Printing		960
Decorations		850
Speaker's gift		140
Publicity		610
Total expenses		21,842
Budget surplus (deficit)	$	0

Actual results for the luncheon follow.

1. The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4,050 invitations were mailed.
2. Attendance was 1,630 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$1,600
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $12.6 per person.
4. Printing, decorations, the speakers 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.

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. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

A

	Master Budget	-	Flexible Budget	=	Volume Variance
Allocated funds	$21,842
Expenses:
Variable expenses
Meals	16,779
Postage	1,403
Fixed expenses
Facility	1,100
Printing	960
Decorations	850
Speakers gift	140
Publicity	610
Total expenses	21,842
Surplus(deficit)	$0

B

Compute flexible budget variances by comparing the flexible budget with the actual results. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Flexible Budget	-	Actual Results	=	Flexible Variances
Allocated funds			$21,842
Expenses:
Variable costs:
Meals			20,538
Postage			1,863
Fixed costs:
Facility			1,600
Printing			960
Decorations			850
Speakers gift			140
Publicity			610
Total expenses			26,561
Surplus(deficit)			$(4,719)