The accounting department at Kerrville College has decided to off er a three-day ethics workshop for local

Question:

The accounting department at Kerrville College has decided to off er a three-day ethics workshop for local CPAs in March 2010. Rose Morris, a tenured professor, will supervise the seminar's planning process and has submitted the following budget to the departmental chairperson:

The $3,600 facilities rent is a fixed rental, which is to be paid to a local hotel for the use of a meeting room. Advertising is also a fixed cost. Meal expense is budgeted at
$10 per person per meal (a total of nine meals to be provided for each participant and each speaker); lodging is budgeted at the rate of $75 per participant and speaker per night. Departmental overhead includes a $10 charge per participant and speaker for supplies as well as a general allocation of 25 percent of revenues for use of departmental secretarial and production resources. The budget was approved and Morris proceeded with the seminar.
a. Recast the budget in a segment margin income statement format.
b. The seminar's actual financial results were as follows:

Because signups were below expectations, the seminar fee was reduced from $900 to $850 and advertising expense was increased. In budgeting for the speakers, Morris neglected to include airfare, which averaged $450 per speaker. With the increased attendance, a larger meeting room had to be rented from the local hotel. Actual lodging costs were as budgeted, but meals were 15 percent more expensive because of the gratuity. Recast the actual results in a segment margin income format.
c. Identify and discuss the factors that are primarily responsible for the difference between the budgeted and the actual profit on the ethicsseminar.