The Redmond Management Association Held Its Annual Public ✓ Solved

The Redmond Management Association held its annual public

The Redmond Management Association 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 a budget for the Year 2 luncheon based on several expectations:

  1. The meal cost per person was expected to be $14.50, with an anticipated attendance of 1,400 individuals.
  2. Postage was calculated at $0.49 per invitation, with 3,000 invitations expected to be mailed.
  3. The facility charge would be $1,000 for a room accommodating up to 1,600 people; if attendance exceeded this, the charge would increase to $1,500.
  4. A fixed amount was designated for printing, decorations, the speaker's gift, and publicity.

However, as a result of changes made before the event, the budget and actual results varied significantly:

  • The president increased the invitation list, resulting in 4,000 invitations mailed.
  • Actual attendance was 1,620 individuals.
  • The facility charge increased to $1,500 due to higher attendance.
  • Meal costs increased to $15.50 per person after adding dessert.
  • Costs for printing, decorations, the speaker’s gift, and publicity were as budgeted.

Using Excel, you will need to:

  1. Prepare a flexible budget.
  2. Compute the sales volume variance and variable cost volume variances comparing the master budget and the flexible budget.
  3. Compute flexible budget variances by comparing the flexible budget with the actual results.

Additionally, create a 4 to 6-slide presentation summarizing:

  • The results of the sales volume and variable cost volume variances comparisons.
  • The results of the flexible budget variances computations.
  • An explanation of the favorable or unfavorable budget variances.

Ensure to cite references to support your assignment and format your citations according to APA guidelines.

Paper For Above Instructions

The Redmond Management Association’s annual public relations luncheon serves as a valuable case study for understanding the budgeting process, variance analysis, and adaptable financial planning within organizations. Conducting a thorough analysis of the budgeting discrepancies provides insights into the impact of unexpected changes on financial outcomes.

Flexible Budget Preparation

The flexible budget is a financial plan that adjusts based on actual attendance levels. For the Year 2 luncheon, it is crucial to create a flexible budget that accurately reflects changes in attendance and related costs.

Original estimates for the luncheon were as follows:

  • Meal cost: $14.50 per person x 1,400 = $20,300
  • Postage cost: $0.49 x 3,000 = $1,470
  • Facility charge: $1,000 (up to 1,600 people)
  • Fixed costs (printing, decorations, speaker's gift, publicity): Allocated budget remains unchanged.

The expected total cost based on the original budget was $25,290. However, due to revised attendance of 1,620 individuals, adjustments are necessary:

  • Meal cost: $15.50 per person x 1,620 = $25,110
  • Postage cost remains unchanged as invitations mailed exceeded the expectation.
  • Facility charge: Increased to $1,500 due to attendance exceeding limit.

The flexible budget, therefore, can be computed to reflect the actual costs based on current attendance.

Variance Analysis

Variance analysis is crucial in identifying the efficiency of the budgeting process. The sales volume variance quantifies the difference between budgeted and actual figures, while variable cost volume variances concern differences in costs associated with changes in volume.

Sales Volume Variance

The sales volume variance can be calculated as follows:

Sales Volume Variance = (Actual Volume - Budgeted Volume) x Budgeted Price

Using the provided numbers: (1,620 - 1,400) x $14.50 = $3,190 favorable variance due to increased attendance.

Variable Cost Volume Variance

Variable cost volume variance considers changes in costs due to varying attendance levels. Using the flexible budget:

Variable Cost Volume Variance = (Actual Volume x Actual Cost per Unit) - (Budgeted Volume x Budgeted Cost per Unit)

In this instance, if we calculate the variable costs:

Meeal costs: (1,620 x $15.50) - (1,400 x $14.50) = $2,350 unfavorable due to increased meal cost.

Postage costs, facility charges, and other expenses would be assessed similarly to provide a comprehensive view of financial performance.

Flexible Budget Variances

Flexible budget variances contrast the flexible budget with actual results, providing a crucial understanding of performance outcomes:

  • Meals: Actual cost ($25,110) vs. Flexible budget ($20,300) = $4,810 unfavorable.
  • Postage costs remained stable and as budgeted ($1,470).
  • Facility costs ($1,500) exceed the budgeted amount ($1,000) = $500 unfavorable.

The total flexible budget variance would encapsulate these detailed insights, allowing management to reflect on budgeting accuracy and resource allocation efficiency.

Conclusion

In summary, the variance analysis reveals the importance of accurate forecasting, effective budget management, and adaptability to unforeseen changes. Improving budget accuracy through comprehensive pre-event planning could mitigate such variances in future events.

To support these insights and reinforce educational perspectives, various academic resources and financial management texts will be consulted.

References

  • Garrison, R. H., & Noreen, E. W. (2018). Managerial Accounting. McGraw-Hill Education.
  • Horngren, C. T., Datar, S. M., & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis. Pearson.
  • Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2018). Financial Accounting. Wiley.
  • Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2019). Managerial Accounting. Wiley.
  • Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
  • Blocher, E., Stout, D. E., & Cokins, G. (2016). Cost Management: A Strategic Emphasis. McGraw-Hill Education.
  • Zimmerman, J. L. (2017). Accounting for Decision Making and Control. McGraw-Hill Education.
  • Shank, J. K., & Govindarajan, V. (2018). Strategic Cost Management: The New Tool for Competitive Advantage. Free Press.
  • Kaplan, R. S., & Norton, D. P. (2015). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Review Press.
  • Mintzberg, H., Ahlstrand, B., & Lampel, J. (2009). Strategy Safari: A Guided Tour Through The Wilds of Strategic Management. Free Press.

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