The Zachary Management Association held its annual public relations luncheon in
ID: 2558636 • Letter: T
Question
The Zachary Management Association held its annual public relations luncheon in April 2017. Based on the previous year’s results, the organization allocated $31,202 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 2017 luncheon.
The budget for the luncheon was based on the following expectations.
Actual results for the luncheon follow.
Reasons for the differences between the budgeted and actual data follow.
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.
ZACHARY MANAGEMENT ASSOCIATION Public Relations Luncheon Budget April 2017 Operating funds allocated $ 31,202 Expenses Variable costs Meals (1,590 × $13.70) 21,783 Postage (3,950 × 0.82) 3,239 Fixed costs Facility 2,900 Printing 1,140 Decorations 1,030 Speaker's gift 320 Publicity 790 Total expenses 31,202 Budget surplus (deficit) $ 0Explanation / Answer
Requirement a Flexible Budget Operating Funds allocated 31202 Expenses Variable costs Meals 24797 =1810*13.7 Postage 4059 =4950*0.82 Total variable costs 28856 Fixed costs Facility 2900 Printing 1140 Decorations 1030 Speaker's gift 320 Publicity 790 Total Fixed costs 6180 Total expenses 35036 Budget Surplus(Deficiet) -3834 Sales Variance Since No sales price is given, It will not be possibe to calculate sales variance However we can calculate sales margin variance which is nothing but Budget surplus(deficiet) variannce which is as follows. Master budget Surplus 0 Flexible budget Surplus -3834 Variance -3834 Unfavourable Varianble cost variance Master Budget Meals expenses 21783 Flexible Budget meals expenses 24797 Variance -3014 Unfavourable Master Budget Postage expenses 3239 Flexible budget Postage expenses 4059 -820 Unfavourable Total variable cost variance -3834 Unfavourable Requirement b Flexible Budget Actual Results Variances Operating Funds allocated 31202 31202 0 None Expenses Variable costs Meals 24797 26064 -1267 Unfavourable Postage 4059 4059 0 None Total variable costs 28856 30123 -1267 Unfavourable Fixed costs Facility 2900 3400 -500 Unfavourable Printing 1140 1140 0 None Decorations 1030 1030 0 None Speaker's gift 320 320 0 None Publicity 790 790 0 None Total Fixed costs 6180 6680 -500 Unfavourable Total expenses 35036 36803 -1767 Unfavourable Budget Surplus(Deficiet) -3834 -5601 1767 Unfavourable
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