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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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.