Managerial Accounting -- Budgeting 1 &
(1) Is this a static or flexible budget?
Since many of the budget line items are based on student enrollment, this budget format is considered to be a flexible budget. The costs of providing instructors and associated benefits is fixed by the state with regard to the ratio of students to teachers, and students per classroom (which is more a function of fire codes and building codes, but it is still a determinant with regard to budget flexibility). The expenses associated with the school facility are fixed and generally cannot deviate in response to increases or decreases in enrollment. Personnel and plant costs are two major items in the school budget, and neither provides options for flexibility. That said, much of the proposed budget is based on student enrollment scenarios -- of which there are three at 120 students, 100 students, and 66 students. As we will see in the response to question #5 below, the budget scenario constructed for student enrollment at 66 students is not viable since the breakeven point is 77 students. As this figure can be determined in advance -- given the appropriate figures or estimates -- a more functional budget would have provided a third scenario, perhaps in the range of 150 students, should the school plant be capable of handling a student body that size.
(2) What is total revenue (excluding grants) per student?
The per student revenue less grant funding is $6,063.06
(3) What are total expenses per student?
The per student expenses are based in part on the number of students enrolled in the charter school. For an enrollment of 120 students, the expenses total $4,518.00, for 100 students, $5,283.00, and for 66 students, $7,646.00. These figures reflect an economy of scale that is based on the regulated fixed costs (Hermanson, et al., 2011). In other words, budget accommodations cannot be made for half of a classroom, or a third of a general Internet charge. Although it is possible to adjust the budget with part-time teaching staff, it is not possible to hold full-day classes with only part-time staff, even if a combination of staff members can represent a full-time equivalent (FTE) on paper.
(4) Do all expenses seem necessary?
Given that this operation is a charter school, an educational...
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