The child and family government benefits seminar was such a success that Advocates for Children will conduct a second seminar in an adjoining community. The executive director decides that this second seminar will attempt to maximize revenues. Consequently, no reduced fee schedule will be offered. All trainees will pay the full seminar fee. The seminar will take place in a smaller conference room than the earlier one. The room can only accommodate a maximum of 45 trainees. Here is the proposed budget for the seminar:
Proposed Seminar Budget
1. Conference room rental $175.00 $ 175.00
2. Audiovisual equipment Rental 75.00
3. 4 presenters @ $500 2,000.00
4. 45 workbooks @ $15 675.00
5. 45 lunches @ $12 540.00
6. 45 coffees @ $3.50 158.00
7. Indirect costs @ 25% of $3,623.00 $ 906.00
8. Profit margin @ 5% of $4,529.00 $ 227.00
You are the executive director. Following the checklist in Figure 11.1, perform all the computations necessary to set a fee. What will your fee be? What is your break-even point? What is your go/no-go decision point?
As the executive director of Advocates for Children, you have had a change of heart. You decide not to attempt to maximize revenues in this second seminar. You decide to exclude a profit margin in the fee computation, but you will include indirect costs. Additionally, the local United Way in the community hosting the seminar has guaranteed 45 participants. If fewer than 45 participants register for the seminar, the United Way will make up the difference. In exchange for this guarantee,
the United Way has asked you to set the seminar fee as low as possible. Following the checklist in Figure 11.1, perform all the computations necessary to set a fee. What will your fee be?
a) FIGURE 11.1 Major Fee-Setting Issues (CHECK LIST)
1. Direct and indirect costs: The fees should be set such that it should be able to recover both direct as well as indirect cost.
2. Depreciation and use allowance: In this case, there are no depreciable items
3. Unallowable costs: No such unallowable expenses in this case
4. Profit margins: Should be recovered from the fees.
5. Fixed and variable costs: Both fixed and variable fees should be recovered
6. Break-even points: Seminar should be conducted only if the number of participants is more than break-even point
7. Market prices: There is no idea given about the market prices in this case, we ...
This post answers two exercises on budget planning in a step-by-step manner.