The Munoz Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $26,360 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: The meal cost per person was expected to be $12.80. The cost driver for meals was attendance, which was expected to be 1,500 individuals. Postage was based on $0.64 per invitation and 3,500 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed. The facility charge is $2,000 for a room that will accommodate up to 1,700 people; the charge for one to hold more than 1,700 people is $2,500. A fixed amount was designated for printing, decorations, the speakers gift, and publicity. MUNOZ MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Operating funds allocated $ 26,360 Expenses Variable costs Meals (1,500 $12.80) 19,200 Postage (3,500 0.64) 2,240 Fixed costs Facility 2,000 Printing 1,050 Decorations 940 Speaker's gift 230 Publicity 700 Total expenses 26,360 Budget surplus (deficit) $ 0 Actual results for the luncheon follow. MUNOZ MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April Year 2 Operating funds allocated $ 26,360 Expenses Variable costs Meals (1,720 $13.50) 23,220 Postage (4,500 0.64) 2,880 Fixed costs Facility 2,500 Printing 1,050 Decorations 940 Speaker's gift 230 Publicity 700 Total expenses 31,520 Budget deficit $ (5,160 ) Reasons for the differences between the budgeted and actual data follow. The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4,500 invitations were mailed. Attendance was 1,720 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,500 At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.5 per person. 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. Master Budget - Flexible Budget = Volume Variance Allocated funds $26,360 Required A Expenses: Variable expenses Meals 19,200 Postage 2,240 Fixed expenses Facility 2,000 Printing 1,050 Decorations 940 Speakers gift 230 Publicity 700 Total expenses 26,360 Surplus(deficit) $0 Required B Flexible Budget - Actual Results = Flexible Variances Allocated funds $26,360 Expenses: Variable costs: Meals 23,220 Postage 2,880 Fixed costs: Facility 2,500 Printing 1,050 Decorations 940 Speakers gift 230 Publicity 700 Total expenses 31,520 Surplus(deficit) $(5,160) Find the calculations for A and B