Ian Barrett

ACCT 2301: S16 Sec.8

CHAPTER 8

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The Westwood Management Association held its annual public relations luncheon in April 2013. Based on the previous years results, the organization allocated $26,882of its operating budget to cover the cost of the luncheon. To ensure that costs would be appropriately controlled, Andrea Cole, the treasurer, prepared the following budget for the 2013 luncheon.

	The budget for the luncheon was based on the following expectations.
1.	The meal cost per person was expected to be $12.90.The cost driver for meals was attendance, which was expected to be 1,510 individuals.
2.	Postage was based on $0.66 per invitation and 3,550 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
3.	The facility charge is $2,100 for a room that will accommodate up to 1,700 people; the charge for one to hold more than 1,700 people is $2,600.
4.	A fixed amount was designated for printing, decorations, the speakers gift, and publicity.

WESTWOOD MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April 2013
Operating funds allocated	$	26,882
Expenses
Variable costs
Meals (1,510 $12.90		19,479
Postage (3,550 0.66)		2,343
Fixed costs
Facility		2,100
Printing		1,060
Decorations		950
Speakers gift		240
Publicity		710
Total expenses		26,882
Budget surplus (deficit)	$	0

Actual results for the luncheon follow.

WESTWOOD MANAGEMENT ASSOCIATION Actual Results for Public Relations Luncheon April 2013
Operating funds allocated	$	26,882
Expenses
Variable costs
Meals (1,730 13.6)		23,528
Postage (4,550 0.66)		3,003
Fixed costs
Facility		2,600
Printing		1,060
Decorations		950
Speakers gift		240
Publicity		710
Total expenses		32,091
Budget deficit	$	(5,209	)

	Reasons for the differences between the budgeted and actual data follow.
1.	The president of the organization, Zachary Taylor, increased the invitation list to include 1,000 former members. As a result, 4,550 invitations were mailed.
2.	Attendance was 1,730 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,600
3.	At the last minute, Ms. Cole decided to add a dessert to the menu, which increased the meal cost to $13.6 per person.
4.	Printing, decorations, the speakers 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.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Negative amount should be indicated by a minus sign.)

b.	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). Negative amount should be indicated by a minus sign.)