Analyzing not for profit entity variances

 
Problem 8-19AAnalyzing not-for-profit entity variancesThe Redmond Management Association held its annual public relations luncheon in . Based on the previous years 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: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.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.The facility charge is $1,000 for a room that will accommodate up to 1,600 people; the charge forPage 379one to hold more than 1,600 people is $1,500.A fixed amount was designated for printing, decorations, the speakers gift, and publicity.REDMOND MANAGEMENT ASSOCIATIONPublic Relations Luncheon BudgetApril Year 2Operating funds allocated $25,290ExpensesVariable costsMeals (1,400 $14.50) 20,300Postage (3,000 $0.49) 1,470Fixed costsFacility 1,000Printing 950Decorations 840Speakers gift 130Publicity 600Total expenses 25,290Budget surplus (deficit) $0Actual results for the luncheon follow.REDMOND MANAGEMENT ASSOCIATIONActual Results for Public Relations LuncheonApril Year 2Operating funds allocated $25,290ExpensesVariable costsMeals (1,620 $15.50) 25,110Postage (4,000 $0.49) 1,960Fixed costsFacility 1,500Printing 950Decorations 840Speakers gift 130Publicity 600Total expenses 31,090Budget deficit $ (5,800)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, 4,000 invitations were mailed.Attendance was 1,620 individuals. Because of , the luncheon was moved to a larger room, thereby increasing the facility charge to $1,500.At the last minute, Ms. Hubbard decided to add a dessert to the menu, which increased the meal cost to $15.50 per person.Printing, decorations, the speakers gift, and publicity costs were as budgeted.

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