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Planning and Controlling the Function of a Budget

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This case has two parts.

Part I.

We have learned about the basic ideas of managerial accounting during the first two modules. Let's try to apply this knowledge and review a sample budget for a charter school (http://www.uscharterschools.org/pub/uscs_docs/r/sample/budget.htm).

The first requirement of this case relates to the planning function of a budget. Comment on the following relating to the budget.

Is this a static or flexible budget?
What are reimbursements and expenses per student?
Which are the highest expense categories?
Do all expenses seem necessary?
Is this school viable? How many students does the school need to break even (show your analysis and state your assumptions for break-even)?
What are the general benefits of preparing this budget?
Discuss how this budget is likely to be used.

Part II.

Use the background material and Internet to answer the following questions.

The second requirement of this case relates to the control function of a budget.

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

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

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Solution Summary

Your tutorial is 517 words and includes an excel analysis for breakeven, discussion of the charter school budget and ideas for complementary measures. This solution requires a basic understanding of breakeven (not for novice level).

Solution Preview

See attached file.

Part I.

Is this a static or flexible budget?

This is a flexible budget, showing revenues and expenses for three different levels of activity.

What are reimbursements and expenses per student?

Total revenue per student varies, depending on level, from $5,667 to $5,830 to $5,996.
Total expenses per student vary depending on level, from $4,804 to $5,061 to $6,963.

Which are the highest expense categories?

Payroll and building are the largest by orders of magnitude (the next largest is less than a third of these).

Do all expenses seem necessary?
This is a judgment call and something that an educational professional would need to consult before finalizing the budget. They have justified many of these items in the commentary on the site. Do they need $1,000 in subscriptions? For what? Do they need that many field ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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