The Finch Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $24,312 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 Year 2 luncheon. The budget for the luncheon was based on the following expectations: The meal cost per person was expected to be $12.40. The cost driver for meals was attendance, which was expected to be 1,460 individuals. Postage was based on $0.56 per invitation and 3,300 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed. The facility charge is $1,600 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,100. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity. FINCH MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April Year 2 Operating funds allocated   $24,312   Expenses       Variable costs       Meals (1,460 × $12.40)   18,104   Postage (3,300 × 0.56)   1,848   Fixed costs       Facility   1,600   Printing   1,010   Decorations   900   Speaker's gift   190   Publicity   660   Total expenses   24,312   Budget surplus (deficit)   $0       Actual results for the luncheon follow. FINCH MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April Year 2 Operating funds allocated   $24,312   Expenses       Variable costs       Meals (1,680 × $13.10)   22,008   Postage (4,300 × 0.56)   2,408   Fixed costs       Facility   2,100   Printing   1,010   Decorations   900   Speaker's gift   190   Publicity   660   Total expenses   29,276   Budget deficit   $(4,964)       Reasons for the differences between the budgeted and actual data follow. The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4,300 invitations were mailed. Attendance was 1,680 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,100 At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.1 per person. Printing, decorations, the speaker’s gift, and publicity costs were as budgeted.k Required: 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. Compute flexible budget variances by comparing the flexible budget with the actual results.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Finch Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $24,312 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 Year 2 luncheon.

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

  1. The meal cost per person was expected to be $12.40. The cost driver for meals was attendance, which was expected to be 1,460 individuals.
  2. Postage was based on $0.56 per invitation and 3,300 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
  3. The facility charge is $1,600 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,100.
  4. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity.

FINCH MANAGEMENT ASSOCIATION

Public Relations Luncheon Budget

April Year 2

Operating funds allocated

 

$24,312

 

Expenses

 

 

 

Variable costs

 

 

 

Meals (1,460 × $12.40)

 

18,104

 

Postage (3,300 × 0.56)

 

1,848

 

Fixed costs

 

 

 

Facility

 

1,600

 

Printing

 

1,010

 

Decorations

 

900

 

Speaker's gift

 

190

 

Publicity

 

660

 

Total expenses

 

24,312

 

Budget surplus (deficit)

 

$0

 

 

 

Actual results for the luncheon follow.

FINCH MANAGEMENT ASSOCIATION

Actual Results for Public Relations Luncheon

April Year 2

Operating funds allocated

 

$24,312

 

Expenses

 

 

 

Variable costs

 

 

 

Meals (1,680 × $13.10)

 

22,008

 

Postage (4,300 × 0.56)

 

2,408

 

Fixed costs

 

 

 

Facility

 

2,100

 

Printing

 

1,010

 

Decorations

 

900

 

Speaker's gift

 

190

 

Publicity

 

660

 

Total expenses

 

29,276

 

Budget deficit

 

$(4,964)

 

 

 

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, 4,300 invitations were mailed.
  2. Attendance was 1,680 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,100
  3. At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.1 per person.
  4. Printing, decorations, the speaker’s gift, and publicity costs were as budgeted.k

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.
Required A Required B
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).)
Allocated funds
Expenses:
Variable expenses
Meals
Postage
Fixed expenses
Facility
Printing
Decorations
Speaker's gift
Publicity
Total expenses
Surplus (deficit)
Required A Required B
Allocated funds
Expenses:
Variable costs:
Meals
Postage
Fixed costs:
Master Budget
$
24,312
Facility
Printing
Decorations
Speaker's gift
Publicity
$
Total expenses
Surplus(deficit)
18,104
1,848
1,600
1,010
900
190
660
24,312
0
Flexible Budget =
< Required A
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).)
Flexible Budget
Actual Results
$
24,312
$
22,008
2,408
2,100
1,010
900
190
660
29,276
(4,964)
< Required A
Volume Variance
||
Required B >
Flexible Variances
Required B >
Transcribed Image Text:Required A Required B 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).) Allocated funds Expenses: Variable expenses Meals Postage Fixed expenses Facility Printing Decorations Speaker's gift Publicity Total expenses Surplus (deficit) Required A Required B Allocated funds Expenses: Variable costs: Meals Postage Fixed costs: Master Budget $ 24,312 Facility Printing Decorations Speaker's gift Publicity $ Total expenses Surplus(deficit) 18,104 1,848 1,600 1,010 900 190 660 24,312 0 Flexible Budget = < Required A 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).) Flexible Budget Actual Results $ 24,312 $ 22,008 2,408 2,100 1,010 900 190 660 29,276 (4,964) < Required A Volume Variance || Required B > Flexible Variances Required B >
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