Question

The Redmond Management Association held its annual public relations luncheon in April 2017. Based on the previous year’s results, the organization allocated $25,290 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 2017 luncheon.

The budget for the luncheon was based on the following expectations:

1. The meal cost per person was expected to be $14.50. The cost driver for meals was attendance, which was expected to be 1,400 individuals.

2. Postage was based on $0.49 per invitation and 3,000 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.

3. The facility charge is $1,000 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,500.

4. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity.

REDMOND MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April 2017
Operating funds allocated	$	25,290
Expenses
Variable costs
Meals (1,400 × $14.50)		20,300
Postage (3,000 × $0.49)		1,470
Fixed costs
Facility		1,000
Printing		950
Decorations		840
Speaker’s gift		130
Publicity		600
Total expenses		25,290
Budget surplus (deficit)	$	0

Actual results for the luncheon follow.

REDMOND MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April 2017
Operating funds allocated	$	25,290
Expenses
Variable costs
Meals (1,620 × $15.50)		25,110
Postage (4,000 × $0.49)		1,960
Fixed costs
Facility		1,500
Printing		950
Decorations		840
Speaker’s gift		130
Publicity		600
Total expenses		31,090
Budget deficit	$	(5,800	)

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, 4,000 invitations were mailed.
2. Attendance was 1,620 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to $1,500.
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $15.50 per person.
4. Printing, decorations, the speaker’s gift, and publicity costs were as budgeted.

Required Questions

1. 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).)

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).)

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in addition I am supposed to Summarize the results of the sales volume and variable cost volume variances computations based on the comparison between the master budget and the flexible budget.

Summarize the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual results.

Justify the favorable or unfavorable budget variances.

Answer 1

Flexible Budget
	Mater	Flexible	Volume variance
Operating funds allocated	25,290	25,290	0	None
Expenses		(
Variable costs
Meals	20,300	23490	3,190	U
		(1620*14.5)
Postage	1,470	1960	490	U
Fixed costs		4000*.49)(
Facility	1,000	1000	0	None
Printing	950	950	0	None
Decorations	840	840	0	None
Speaker’s gift	130	130	0	None
Publicity	600	600	0	None
Total expenses	25,290	28,970	3,680	U
Budget surplus (deficit)	0	-3,680	-3,680	U
ans 2
Comparison of flexiblebudget with actual results
	Flexible	Actual	Flexible Variance
Operating funds allocated	25290	25,290	0
Expenses
Variable costs
Meals	23490	25,110	1,620	U
Postage	1960	1,960	0	None
Fixed costs			0	None
Facility	1000	1,500	500	U
Printing	950	950	0	None
Decorations	840	840	0	None
Speaker’s gift	130	130	0	None
Publicity	600	600	0	None
Total expenses	28970	31,090	2,120	U
(Deficit)	-3680	-5800	-2,120	U
ans 3
The sales volume variance
Meals and postage in unfavorable due to increase in no. of meals and individuals. So that is justified
The meals were higher than budgeted but the reason for that was addition of dessert un the meal so that
is justified.
Facility variance was unfavorable as due to increase in no. of guest this cost was increased due to it that is also
justified
If any doubt please comemnt