The Rooney Management Association held its annual public relations luncheon in April Year 2. Based on the previous year's results, the organization allocated $27,938 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 $13.10. The cost driver for meals was attendance, which was expected to be 1,530 individuals. 2. Postage was based on $0.70 per invitation and 3,650 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed. 3. The facility charge is $2,300 for a room that will accommodate up to 1,700 people; the charge for one to hold more than 1,700 people is $2,800. 4. A fixed amount was designated for printing, decorations, the speaker's gift, and publicity. ROONEY MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Operating funds allocated $27,938 Expenses Variable costs Meals (1,530 x $13.10) 20,043 Postage (3,650 x 0.70) 2,555 Fixed costs Facility 2,300 Printing 1,080 Decorations 970 Speaker's gift 260 Publicity 730 Total expenses 27,938 Budget surplus (deficit) $ 0 $ Actual results for the luncheon follow. ROONEY MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April Year 2 Operating funds allocated $27,938 Expenses Variable costs Meals (1,750 x $13.80) 24, 150 Postage (4,650 x 0.70) 3,255 Fixed costs Facility 2,800 Printing 1,080 Decorations 970 Speaker's gift 260 Publicity 730 Total expenses 33, 245 Budget deficit $(5,307) 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, 4,650 invitations were mailed. 2. Attendance was 1,750 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,800 3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.8 per person. 4. Printing, decorations, the speaker's 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).) Flexible Budget Volume Variance Master Budget $ 27,938 Allocated funds 20,043 2,555 2,300 Expenses: Variable expenses Meals Postage Fixed expenses Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus(deficit) 1,080 970 260 730 27,938 $ 0 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 $ 27,938 Allocated funds Expenses: Variable costs: Meals 24,150 3,255 Postage Fixed costs: 2,800 1,080 970 Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus(deficit) 260 730 $ 33,245 (5,307)