Audrey Hollingsworth, director of the Pacific Park School (PPS), was reviewing the results of the school’s summer camp program in preparation for the upcoming academic year. On her desk was a report (Exhibit 1) showing that instead of the $6,100 surplus she had budgeted, the program had operated at a $125 loss. While the loss was not great, she had been planning to use the surplus to make some much needed improvements in the school’s playground facilities. She now would need to either postpone these plans or find alternate sources of funding. Unhappy with this prospect, she resolved to determine exactly why the budgeted surplus had evaporated.

Assignment

1.Calculate all relevant variances

2.Prepare a nontechnical memorandum to the board of directors, explaining why the $6,000 budgeted surplus turned into a $125 loss.

3.What should Ms. Hollingsworth do to avoid similar problems in the future?