Charter School Budget

Let’s review Charter School Budget (attached). This budget is prepared assuming three levels of student enrollment (66, 100 and 120). Revenue and expenses projections are shown in the budget. Operating assumptions are shown in “Schedule A”.

The first requirement of this part of the paper relates to the planning function of a budget. Comment on the following relating to the charter school budget:

*Is this a static or flexible budget?
*What is total revenue (excluding grants) per student?
*What are total expenses per student?
*Do all expenses seem necessary?
*Is this school viable? How many students does the school need to break even (show your calculations with analysis and state your assumptions for break-even)?

(Note: For break-even analysis, ignore revenue received as “Grants” and “Startup Costs” (Schedule A).

*What are the general benefits of preparing this budget?
*Discuss how this budget is likely to be used for the control function.

Part II (1 page)

The second part of the paper relates to the control function of a budget. Use the background material and Internet to answer the following questions.

1) Variance analysis is a traditional tool used for planning and control. Comment on advantages and disadvantages of using this approach for performance evaluations.

2) Do you have any suggestions for complementary or alternative performance measures?

This part of the paper should be 2 pages and needs to include answers to all the questions. Include references in APA format.

FOR THE PART TWO (2 PAGES)

Differential analysis involves knowing which costs are relevant, i.e. future costs that vary among alternatives. It is important to know what information to use and not just how to execute the analysis.

Herrestad Company receives an offer to make a new product, called C, for a new customer. The customer wants to buy 1,000 units. Product C has the same cost structure as product B with three exceptions. The new customer is only willing to pay $150 per unit, direct materials costs will decrease by $12 per unit and Herrestad does not have to incur any variable selling and administrative expenses.

1) Make a list of the expenses and amounts that are relevant for this decision. How much with the sale of this product contribute to the profitability of Herrestad?
2) What if the company only pays $140 per unit? How does this change the contribution towards profitability?
3) If you were the manager, would you accept this order? What considerations, other than financial would enter into your decision?

This part of the paper should be 2 pages and needs to include answers to all the questions. Include references in APA format.

FOR THE PART THREE (1 PAGE)

CMA Canada’s 2020 Vision document states, “major activities that will define the management accountant’s role in 2020….include strategic risk management that identifies and responds to threats, challenges and opportunities; forward-looking financial and performance management fueled by: a. technology-enabled data analysis applied to a broad collection of indicators, b. increasingly agile forecasting and planning processes, and c. fact-based decision making; …….”

Total Students   120   100   66
Number of School Days   170   170   170
Number of Teachers   3.60   3.00   3.00
Number of Special Ed Teachers   0.50   0.50   0.50
Number of LEP Teachers   0.50   0.50   0.50
Number of Health Service Workers   0.20   0.20   0.20
Number of Paraprofessionals   4.80   3.30   3.30
Number of Secretaries   1.00   1.00   1.00
Number of Custodians   0   0   0
Number of Clerks   0   0   0
Per Student Instructional Material   $150.00   $150.00   $150.00
Per Student Instructional Supplies   $60.00   $60.00   $60.00
Per Student General Revenue   $3,546.00   $3,546.00   $3,546.00
Per Student Compensatory revenue   $1,775.00   $1,775.00   $1,775.00
Percentage of Students on AFDC   26.47   26.47   26.47
Per Student Transport Revenue   $170.00   $170.00   $170.00
Per Student Transportation Reduction   -$42.44   -$42.44   -$42.44
Per Student Food Reimbursement   $246.50   $246.50   $246.50
Per Student Federal Title I Funds   $368.00   $368.00   $368.00

Schedule C:- Salaries
Teachers   88,000   88,000   88,000
Paraprofessionals   52,800   52,800   52,800
Secretary   24,000   24,000   24,000
Health Service Workers   4,800   4,800   4,800
Contract   16,000   16,000   16,000
Competancy- Based Salarary Increases   15,000   15,000   15,000
Total Salaries   200,600   200,600   200,600

Schedule D:- Benefits
FICA (7.65%)   15,346   15,346   15,346
Retirement (8.14%)   16,329   16,329   16,329
Life & Disability (0.9%)   1,805   1,805   1,805
Health & Other Insurance (0.7%)   1,404   1,404   1,404
Workman Compensation (.34%)   682   682   682
Total Benefits (17.73%)   35,566   35,566   35,566

***It is a modified verison of a sample charter school budget available on National Charter School Resource Center website (http://www.charterschoolcenter.org/)***
A   B   Total
Sales   $960,000    $1,080,000    $2,040,000
Variable Costs
Direct Materials   $560,000    $240,000    $800,000
Direct Labor   $120,000    $360,000    $480,000
Variable Overhead   $80,000    $120,000    $200,000
Variable Selling and Administrative Expenses   $26,000    $54,000    $80,000
Fixed Manufacturing Overhead   $130,000    $70,000    $200,000
Fixed Selling and Administrative Expenses   $60,000    $40,000    $100,000
Net Income   (-$16,000)   $196,000    $180,000

Product A   Product B   Total
Manufacturing Overhead   (65/100)x$200,000= $130,000   (35/100)x$200,000= $70,000   $200,000
Selling and Administrative Expenses   (15/25)x$100,000= $60,000   (10/25)x$100,000= $40,000   $100,000

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