The Baird Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $22,328 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 $12.00. The cost driver for meals was attendance, which was expected to be 1,420 individuals.
2. Postage was based on $0.48 per invitation and 3,100 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
3. The facility charge is $1,200 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,700.
4. A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

BAIRD MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated	$	22,328
Expenses
Variable costs
Meals (1,420 $12.00)		17,040
Postage (3,100 0.48)		1,488
Fixed costs
Facility		1,200
Printing		970
Decorations		860
Speaker's gift		150
Publicity		620
Total expenses		22,328
Budget surplus (deficit)	$	0

Actual results for the luncheon follow.

BAIRD MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated	$	22,328
Expenses
Variable costs
Meals (1,640 $12.70)		20,828
Postage (4,100 0.48)		1,968
Fixed costs
Facility		1,700
Printing		970
Decorations		860
Speaker's gift		150
Publicity		620
Total expenses		27,096
Budget deficit	$	(4,768	)

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, 4,100 invitations were mailed.
2. Attendance was 1,640 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$1,700
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $12.7 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.

Required A Required B 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).) Flexible Budget = Volume Variance Master Budget $ 22,328 17,040 1,488 Allocated funds Expenses: Variable expenses Meals Postage Fixed expenses Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus(deficit) 1,200 970 860 150 620 22,328 0 $ Required A Required B > Required A Required 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 Flexible Variances Actual Results $ 22,328 20,828 1.968 Allocated funds Expenses: Variable costs: Meals Postage Fixed costs: Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus(deficit) 1,700 970 860 150 620 27,096 (4,768) $