ACC 543  Controlling Business Operations

ACC 543  Controlling Business Operations

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ACC 543  Controlling Business Operations
The Fanning Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $23,810 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:

The meal cost per person was expected to be $12.30. The cost driver for meals was attendance, which was expected to be 1,450 individuals.
Postage was based on $0.54 per invitation and 3,250 invitations were expected to be mailed. The cost driver for postage was number of invitations mailed.
The facility charge is $1,500 for a room that will accommodate up to 1,600 people; the charge for one to hold more than 1,600 people is $2,000.
A fixed amount was designated for printing decorations the speaker’s gift and publicity.

FANNING MANAGEMENT ASSOCIATION
Public Relations Luncheon Budget
April Year 2
Operating funds allocated $ 23,810
Expenses
Variable costs
Meals (1,450 × $12.30) 17,835
Postage (3,250 × 0.54) 1,755
Fixed costs
Facility 1,500
Printing 1,000
Decorations 890
Speaker’s gift 180
Publicity 650
Total expenses 23,810
Budget surplus (deficit) $ 0

Actual results for the luncheon follow.

FANNING MANAGEMENT ASSOCIATION
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated $ 23,810
Expenses
Variable costs
Meals (1,670 × $13.00) 21,710
Postage (4,250 × 0.54) 2,295
Fixed costs
Facility 2,000
Printing 1,000
Decorations 890
Speaker’s gift 180
Publicity 650
Total expenses 28,725
Budget deficit $ (4,915 )

Reasons for the differences between the budgeted and actual data follow.

The president of the organization, Rodney Snow, increased the invitation list to include 1,000 former members. As a result, 4,250 invitations were mailed.
Attendance was 1,670 individuals. Because of higher-than-expected attendance, the luncheon was moved to a larger room, thereby increasing the facility charge to$2,000
At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $13.0 per person.
Printing, decorations, the speaker’s 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.

b. Compute flexible budget variances by comparing the flexible budget with the actual results.