Performance Evaluation|Course hero helper
Posted: February 19th, 2023
For this assignment, refer to the scenario located in “Problems – Series A,” section 8-19A of Ch. 8, “Performance Evaluation,“ of Fundamentals of Managerial Accounting Concepts. This scenario puts you in charge of preparing a budget for the Redmond Management Association annual public relations luncheon.
Read the scenario in the textbook and complete the activity below.
Use Microsoft® 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.
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.
SOLUTION
Preparing a Flexible Budget A flexible budget is a budget that adjusts for changes in activity levels, such as sales volume, and provides a more accurate representation of expected costs and revenues. To prepare a flexible budget, you would need to identify the different cost and revenue components that vary with activity levels and estimate their relationships. This can be done by using historical data to estimate the cost and revenue functions, or by using industry benchmarks or other relevant data sources. Once you have estimated the cost and revenue functions, you can use them to project the costs and revenues for different activity levels. The resulting budget would be a flexible budget that adjusts for changes in activity levels.
Computing Sales Volume Variance and Variable Cost Volume Variances The sales volume variance and variable cost volume variances are measures of the differences between the master budget and the flexible budget, based on changes in sales volume or activity levels. The sales volume variance is the difference between the budgeted revenue and the revenue that would have been achieved if the actual sales volume had been used in the budget. The variable cost volume variances are the differences between the budgeted variable costs and the variable costs that would have been incurred if the actual sales volume had been used in the budget.
Computing Flexible Budget Variances
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