ACC 543 Wk 4 – Practice: Planning, Coordinating, and Controlling Business Operations

The Adams Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $21,842 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 $11.90. The cost driver for meals was attendance, which was expected to be 1,410 individuals.
2. Postage was based on $0.46 per invitation and 3,050 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
3. The facility charge is $1,100 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,600.
4. 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.

1. The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4,050 invitations were mailed.
2. Attendance was 1,630 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$1,600
3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $12.6 per person.
4. Printing, decorations, the speaker’s gift, and publicity costs were as budgeted.

Required:

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.
2. Compute flexible budget variances by comparing the flexible budget with the actual  results.