Task: Management by Exception
Beta Alpha Psi (BAP), the accounting honorary fraternity, held a homecoming party. The fraternity expected attendance of 70 persons and prepared the following budget:
Room rental $ 140
Food $ 700
Entertainment $ 600
Decorations $ 220
Total $1,660
After BAP paid all the bills for the party, the total cost came to $1,835, or $175 over budget. Details are: $140 for room rental; $905 for food; $600 for entertainment; and $190 for decorations. Eighty-five persons attended the party.
1. Prepare a performance report for the party that shows how actual costs differed from the budget. That is, include in your report the budgeted amounts, actual amounts, and variances.
2. Suppose the fraternity uses a management-by-exception rule. Which costs deserve further examination? Why?