ACC/543: Managerial Accounting & Legal Aspects of Business
Review the scenario and watch this week’s videos before you complete the activity below. This scenario can also be found in the “Problems – Series A” section 8-19A of Ch. 8, “Performance Evaluation” of Fundamentals of Managerial Accounting Concepts.
Scenario: 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, you, the treasurer, prepared the following budget for the Year 2 luncheon.
Use Excel—showing all work and formulas—to complete the following:
Prepare a flexible budget.
Compute the sales volume variance and the variable cost volume variances based on a comparison between the master budget and the flexible budget.
Compute flexible budget variances by comparing the flexible budget with the actual results.
Mr. Snow was extremely upset with the budget deficit. He immediately called you, the treasurer, to complain about the budget variance for the meal cost. He told you that the added dessert caused the meal cost to be $4,810 ($25,110-$20,300) over budget. He added, “I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next budget meeting of the budget committee, I want you to explain what happened.”
Create a 6- to 8-slide presentation for the budget committee meeting. Complete the following in your presentation:
Summarize the results of the sales volume and variable cost volume variances computations based on the comparison between the master budget and the flexible budget.
Summarize the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual results.
Justify the favorable or unfavorable budget variances.
Since this is a not-for-profit organization, address why anyone should be concerned with meeting the budget.
Make recommendations for what can be done differently to stay on budget for future luncheons. Provide specific examples to support your recommendations.
Cite references to support your assignment.
Format your citations according to APA guidelines.
Also, here is some from the professor for a little direction for each of the first eight points in the rubric.
1. Prepared flexible budget Weight: 10% LO 8-1 Look at Problem 8-19A in Chapter 8.
2. Computing the sales volume variance and variable cost volume variances Weight: 10% LO 8-3
Volume variances between Master Budget and Flexible Budget.
3. Computing the flexible budget variance Weight: 10% LO 8-4
Flexible budget variance between flexible budget and actual results.
4. Summarized the results of the sales volume and variable cost volume variances Weight: 13% LO 8-3
Summarize the results from 2. Above. Be creative and innovative.
5. Summarized the results of the flexible budget variances Weight: 13% LO 8-4
Summarize the results from 3. Above. Be creative and innovative.
6. Justified the budget variances Weight: 13%
Justify the budget, who is responsible for which favorable or unfavorable variances and why.
7. The importance of meeting the budget Weight: 13%
Why would a not-for-profit be concerned about staying in budget? Who would be concerned?
8. Recommendations for staying on budget Weight: 13%
Make recommendations for how to stay within budget next time? What went wrong this time?