Apply: Signature Assignment: Flexible Budget
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.
Use Excel—showing all work and formulas—to complete the following:
o Prepare a flexible budget.
o Compute the sales volume variance and the variable cost volume variances based on a comparison between the master budget and the flexible budget.
o Compute flexible budget variances by comparing the flexible budget with the actual results.
Create a 6- to 8-slide presentation for the budget committee meeting. Complete the following in your presentation:
o Summarize the results of the sales volume and variable cost volume variances computations based on the comparison between the master budget and the flexible budget.
o Summarize the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual results.
o Justify the favorable or unfavorable budget variances.
o Since this is a not-for-profit organization, address why anyone should be concerned with meeting the budget.
o Make recommendations for what can be done differently to stay on budget for future luncheons. Provide specific examples to support your recommendations.
Cite references to support your assignment.
Format your citations according to APA guidelines.
Submit your assignment.
Analyzing not-for-profit entity variances
The Redmond Management Associations 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 number of invitations mailed.
3. The facility charged 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.
Redmond Management Association
Public Relations Luncheon Budget (April Year 2)
Operation funds allocated $25,290
Meals (1,400 x $14.50) = 20,300
Postage (3,000 x $0.49) = 1,470
Facility – 1000
Printing – 950
Decorations – 840
Speaker’s gift – 130
Publicity – 600
Total expenses – $25,290
Budget surplus (deficit) $ 0
Redmond Management Association
Actual Results for Public Relations Luncheon April year 2
Operating funds allocated $25,290
Meals (1620 x $15.50) = 25,110
Postage (4,000 x $0.49) = 1,960
Facility – 1500
Printing – 950
Speaker’s gift -130
Publicity – 600
Total expenses – 31090
Budget deficit – 5800
Reasons for the differences between the budget and actual data follow
1. The president of the organization, Rodney snow, increased the invitation list to include 1000 former members. As a result 4000 invitations were mailed
2. Attendance was 1620 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasingly the facility charge to $1500
3. At the last minute, Ms. Hubbard decided to add a desert to the menu, which increased the meal cost to $15.50 per person.
4. Printing, decorations, the speaker’s gift, and publicity costs were as budgeted.
1. Prepare a flexible budget and compute the sales and variable cost volume variance based on a comparison between the master budget and the flexible budget.
2. Compute flexible budget variance by comparing the flexible budget with the actual results
3. Mr. Snow was extremely upset with the budget deficit. He immediately called M. Hubbard to complain about the budget variance for the meal cost. He told Ms. Hubbard that the added dessert caused the meal cost to be $4,810 ($25110-$20300) over budget. He added, “I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next meeting of the budget committee, I want you to explain what happened. Assume that you are Ms. Hubbard what would you tell the members of the budget committee?
4. Since this is a not for profit organization why should anyone be concerned with meeting the budget?
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