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Accounting, Pages: 2

Flexible Budget – Redmond Management Association

Flexible Budget – Redmond Management Association

 

REDMOND MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated 25290
Expenses
Variable costs
Meals (1,400 x $14.50) 20300
Postage (3,000 x $0.49) 1470
Fixed Costs
Facility 1000
Printing 950
Decorations 840
Speaker’s gifts 130
Publicity 600
Total Expenses 25290
Budget surplus (deficit) 0

 

REDMOND MANAGEMENT ASSOCIATION
Actual Public Relations Luncheon
April Year 2
Operating funds allocated                                                          25,290.00
Expenses
Variable costs
Meals (1,400 x $14.50)                                                          25,110.00
Postage (3,000 x $0.49)                                                             1,960.00
Fixed Costs
Facility                                                             1,500.00
Printing                                                                950.00
Decorations                                                                840.00
Speaker’s gifts                                                                130.00
Publicity                                                                600.00
Total Expenses                                                          31,090.00
Budget surplus (deficit)                                                          (5,800.00)

 

Master Budget Flexible Budget Volume Variance F/U
Allocated Funds 25290  $                           25,290.00
Expenses:
Variable Expenses
Meals 20300  $                           23,490.00                      (3,190.00) Unfavorable
Postage 1470  $                              1,960.00                          (490.00) Unfavorable
Fixed Expenses
Facility 1000  $                              1,500.00                          (500.00) Unfavorable
Printing 950  $                                 950.00                                     –
Decorations 840  $                                 840.00                                     –
Speaker’s Gifts 130  $                                 130.00                                     –
Publicity 600  $                                 600.00                                     –
Total Expenses 25290  $                           29,470.00                      (4,180.00) Unfavorable
Budget Surplus (deficit) 0  $                           (4,180.00)                        4,180.00 Unfavorable
Flexible Budget Actual Results Volume Variance F/U
Allocated Funds 25290  $                           25,290.00
Expenses:
Variable Expenses
Meals 23490  $                           25,110.00                      (1,620.00) Unfavorable
Postage 1960  $                              1,960.00                                     – Unfavorable
Fixed Expenses
Facility 1500  $                              1,500.00                                     – Unfavorable
Printing 950  $                                 950.00                                     –
Decorations 840  $                                 840.00                                     –
Speaker’s Gifts 130  $                                 130.00                                     –
Publicity 600  $                                 600.00                                     –
Total Expenses 29470  $                           31,090.00                      (1,620.00) Unfavorable
Budget Surplus (deficit) -4180  $                           (5,800.00)                        1,620.00 Unfavorable

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Question 

Flexible Budget - Redmond Management Association

Flexible Budget – Redmond Management Association

For this assignment, refer to the scenario located in “Problems – Series A,” section 8-19A of Ch. 8, “Performance Evaluation,“ of Fundamentals of Managerial Accounting Concepts. This scenario puts you in charge of preparing a budget for the Redmond Management Association annual public relations luncheon.

Read the scenario in the textbook and complete the activity below.

The Redmond Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $25,290 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 $14.50. The cost driver for meals was attendance, which was expected to be 1,400 individuals.
2. Postage was based on $0.49 per invitation and 3,000 invitations were expected to be mailed. The cost driver for postage was a number of invitations mailed.
3. The facility charge is $1,000 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $1,500.
4. A fixed amount was designated for printing, decorations, the speaker’s gift, and publicity.

Use Microsoft® Excel®—showing all work and formulas—to complete the following:

Prepare a flexible budget.
Compute the sales volume variance and the 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.