Analyzing not for profit entity variances


Problem 8-19AAnalyzing not-for-profit entity variances
The 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.
Public Relations Luncheon Budget
April Year 2
Operating funds allocated $25,290
Variable costs
Meals (1,400 $14.50) 20,300
Postage (3,000 $0.49) 1,470
Fixed costs
Facility 1,000
Printing 950
Decorations 840
Speakers gift 130
Publicity 600
Total expenses 25,290
Budget surplus (deficit) $0
Actual results for the luncheon follow.
Actual Results for Public Relations Luncheon
April Year 2
Operating funds allocated $25,290
Variable costs
Meals (1,620 $15.50) 25,110
Postage (4,000 $0.49) 1,960
Fixed costs
Facility 1,500
Printing 950
Decorations 840
Speakers gift 130
Publicity 600
Total expenses 31,090
Budget 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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