Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Zachary Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $31,202 of

The Zachary Management Association held its annual public relations luncheon in April Year 2. Based on the previous years results, the organization allocated $31,202 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 $13.70. The cost driver for meals was attendance, which was expected to be 1,590 individuals.
  2. Postage was based on $0.82 per invitation and 3,950 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
  3. The facility charge is $2,900 for a room that will accommodate up to 1,700 people; the charge for one to hold more than 1,700 people is $3,400.
  4. A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

ZACHARY MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated $ 31,202
Expenses
Variable costs
Meals (1,590 $13.70) 21,783
Postage (3,950 0.82) 3,239
Fixed costs
Facility 2,900
Printing 1,140
Decorations 1,030
Speaker's gift 320
Publicity 790
Total expenses 31,202
Budget surplus (deficit) $ 0

Actual results for the luncheon follow.

ZACHARY MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated $ 31,202
Expenses
Variable costs
Meals (1,810 $14.40) 26,064
Postage (4,950 0.82) 4,059
Fixed costs
Facility 3,400
Printing 1,140
Decorations 1,030
Speaker's gift 320
Publicity 790
Total expenses 36,803
Budget deficit $ (5,601 )

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, 4,950 invitations were mailed.
  2. Attendance was 1,810 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$3,400
  3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $14.4 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.

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

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. (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 $31,202
Expenses:
Variable expenses
Meals 21,783
Postage 3,239
Fixed expenses
Facility 2,900
Printing 1,140
Decorations 1,030
Speakers gift 320
Publicity 790
Total expenses 31,202
Surplus(deficit) $0

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 $31,202
Expenses:
Variable costs:
Meals 26,064
Postage 4,059
Fixed costs:
Facility 3,400
Printing 1,140
Decorations 1,030
Speakers gift 320
Publicity 790
Total expenses 36,803
Surplus(deficit) $(5,601)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of External Auditing

Authors: Brenda Porter, David Hatherly, Jon Simon

3rd Edition

0470018259, 9780470018255

More Books

Students also viewed these Accounting questions

Question

b. A workshop on stress management sponsored by the company

Answered: 1 week ago