Alpha Psi (BAP), the accounting honorary fraternity, held a homecoming party. The fraternity expected attendance of 70 persons and prepared the following budget:

Room rental ...................................    $ 140

Food ................................................       700

Entertainment ...............................       600

Decorations ...................................       220

Total ...............................................  $1,660

After BAP paid all the bills for the party, the total cost came to $1,865, or $205 over budget. Details are $140 for room rental; $865 for food; $600 for entertainment; and $260 for decorations. Eighty-five people attended the party.

1. Prepare a performance report for the party that shows how actual costs differed from the budget. That is, include in your report the budgeted amounts, actual amounts, and variances.

2. Suppose the fraternity uses a management-by-exception rule. Which costs deserve further examination? Why?