The Jordan Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $25,842 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 $12.70. The cost driver for meals was attendance, which was expected to be 1,490 individuals.
2. Postage was based on $0.62 per invitation and 3,450 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
3. The facility charge is $1,900 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,400.
4. A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

JORDAN MANAGEMENT ASSOCIATION

Public Relations Luncheon Budget

April Year 2

Operating funds allocated

$

25,842

Expenses

Variable costs

Meals (1,490 $12.70)

18,923

Postage (3,450 0.62)

2,139

Fixed costs

Facility

1,900

Printing

1,040

Decorations

930

Speaker's gift

220

Publicity

690

Total expenses

25,842

Budget surplus (deficit)

$

0

Actual results for the luncheon follow.

JORDAN MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated	$	25,842
Expenses
Variable costs
Meals (1,710 $13.40)		22,914
Postage (4,450 0.62)		2,759
Fixed costs
Facility		2,400
Printing		1,040
Decorations		930
Speaker's gift		220
Publicity		690
Total expenses		30,953
Budget deficit	$	(5,111	)

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, 4,450 invitations were mailed.
2. Attendance was 1,710 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,400
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.4 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	$25,842
Expenses:
Variable expenses
Meals	18,923
Postage	2,139
Fixed expenses
Facility	1,900
Printing	1,040
Decorations	930
Speakers gift	220
Publicity	690
Total expenses	25,842
Surplus(deficit)	$0

B-

ompute 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			$25,842
Expenses:
Variable costs:
Meals			22,914
Postage			2,759
Fixed costs:
Facility			2,400
Printing			1,040
Decorations			930
Speakers gift			220
Publicity			690
Total expenses			30,953
Surplus(deficit)			$(5,111)