The Campbell Management Association held its annual public relations luncheon in
ID: 2527364 • Letter: T
Question
The Campbell Management Association held its annual public relations luncheon in April 2017. Based on the previous year’s results, the organization allocated $23,312 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.
The meal cost per person was expected to be $12.20. The cost driver for meals was attendance, which was expected to be 1,440 individuals.
Postage was based on $0.52 per invitation and 3,200 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
The facility charge is $1,400 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,900.
A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity.
Actual results for the luncheon follow.
Reasons for the differences between the budgeted and actual data follow.
The president of the organization, Zachary Taylor, increased the invitation list to include 1,000 former members. As a result, 4,200 invitations were mailed.
Attendance was 1,660 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$1,900
At the last minute, Ms. Cole decided to add a dessert to the menu, which increased the meal cost to $12.9 per person.
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.
CAMPBELL MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April 2017 Operating funds allocated $ 23,312 Expenses Variable costs Meals (1,440 × $12.20) 17,568 Postage (3,200 × 0.52) 1,664 Fixed costs Facility 1,400 Printing 990 Decorations 880 Speaker's gift 170 Publicity 640 Total expenses 23,312 Budget surplus (deficit) $ 0Explanation / Answer
a.
b.
Flexible Budget Volume Variances Master Budget Operating Funds Allocated $ 23,312 $ 23,312 Expenses Variable Costs Meals 20,252 2,684 U 17,568 Postage 2,184 520 U 1,664 Fixed Costs Facility 1,900 500 U 1,400 Printing 990 N 990 Decorations 880 N 880 Speakers' Gift 170 N 170 Publicity 640 N 640 Total Expenses 27,016 3,704 U 23,312 Budge Surplus ( Deficit) (3,704) 3,704 U 0