The Franklin Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $24,818 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 $12.50. The cost driver for meals was attendance, which was expected to be 1,470 individuals.
2. Postage was based on $0.58 per invitation and 3,350 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
3. The facility charge is $1,700 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,200.
4. A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

FRANKLIN MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated	$	24,818
Expenses
Variable costs
Meals (1,470 $12.50)		18,375
Postage (3,350 0.58)		1,943
Fixed costs
Facility		1,700
Printing		1,020
Decorations		910
Speaker's gift		200
Publicity		670
Total expenses		24,818
Budget surplus (deficit)	$	0

Actual results for the luncheon follow.

FRANKLIN MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated	$	24,818
Expenses
Variable costs
Meals (1,690 $13.20)		22,308
Postage (4,350 0.58)		2,523
Fixed costs
Facility		2,200
Printing		1,020
Decorations		910
Speaker's gift		200
Publicity		670
Total expenses		29,831
Budget deficit	$	(5,013	)

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, 4,350 invitations were mailed.
2. Attendance was 1,690 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,200
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.2 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.

Complete this question by entering your answers in the tabs below.

• 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	-	Actual Results	=	Flexible Variances
Allocated funds			$24,818
Expenses:
Variable costs:
Meals			22,308
Postage			2,523
Fixed costs:
Facility			2,200
Printing			1,020
Decorations			910
Speakers gift			200
Publicity			670
Total expenses			29,831
Surplus(deficit)			$(5,013)

• Required A

• 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).)

	Master Budget	-	Flexible Budget	=	Volume Variance
Allocated funds	$24,818
Expenses:
Variable expenses
Meals	18,375
Postage	1,943
Fixed expenses
Facility	1,700
Printing	1,020
Decorations	910
Speakers gift	200
Publicity	670
Total expenses	24,818
Surplus(deficit)	$0

• Required A