For this assignment, refer to the scenario located in Problems ? Series A,? section 8-19A of Ch. 8, Performance Evaluation, o
For this assignment, refer to the scenario located in “Problems – Series A,” section 8-19A of Ch. 8, “Performance Evaluation,“ of Fundamentals of Managerial Accounting Concepts. This scenario puts you in charge of preparing a budget for the Redmond Management Association annual public relations luncheon. I have uploaded the article below.
Read the scenario in the textbook and complete the activity below.
Use Microsoft® Excel®—showing all work and formulas—to complete the following:
- Prepare a flexible budget.
- Compute the sales volume variance and the variable cost volume variances based on a comparison between the master budget and the flexible budget.
- Compute flexible budget variances by comparing the flexible budget with the actual results.
Create a 6- to 8-slide presentation for the budget committee meeting. Complete the following in your presentation:
- 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.
- Since this is a not-for-profit organization, address why anyone should be concerned with meeting the budget.
- Make recommendations for what can be done differently to stay on budget for future luncheons. Provide specific examples to support your recommendations.
Cite references to support your assignment.
Problem 8-19A Analyzing not-for-profit entity variances
The Redmond Management Association held its annual public relations luncheon in April year 2. 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 Year 2 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.
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REDMOND MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2
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Operating funds allocated $25,290 Expenses Variable costs 20,300 Meals (1,400 x $14.50) 1,470 Postage (3,000 x $0.49) 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.
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REDMOND MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 |
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Operating funds allocated $25,290 Expenses Variable costs 25,110 Meals (1,400 x $14.50) 1,960 Postage (3,000 x $0.49) Fixed Costs Facility 1,500 Printing 950 Decorations 840 Speaker’s gift 130 Publicity 600 Total Expenses 31,090 Budget Surplus (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
to $15.50 per person.
4. Printing, decorations, the speaker’s gift, and publicity costs 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.
c. Mr. Snow was extremely upset with budget deficit. He immediately called Ms. Hubbard to complain
About the budget variance for the meal cost. He told Ms. Hubbard that the added dessert caused the
meal cost to be $4,810 ($25,110-$20,300) over budget. He added, “I could expect a couple hundred
dollars one way or the other, but several thousand is totally unacceptable. At the next meeting of the
budget committee, I want you to explain what happened.” Assume that you are Ms. Hubbard. What
would you tell the members of the budget committee?
d. Since this is a not-for-profit organization, why should anyone be concerned with meeting the budget?
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