Problem 1 (5 points):

You are the Field Director for the International Rescue Committee’s  (IRC) West African food-relief effort. IRC’s executive director in New York has asked you to prepare a monthly operating budget based on feeding 15,000 people per day as well as a flexible budget based on a 30% increase in the number of people will have to feed each day.

Your field operation has three full-time employees. A Field Director, who earns \$48,000 per year, a Security Chief, earning \$30,000 per year, and a Field Manager, who earns \$24,000 per year. IRC spends an additional 25% of each IRC employee’s annual salary to pay for the cost of health insurance and retirement benefits.

To operate the ten feeding sites under your control, you have a fleet of trucks. The trucks deliver food and cooking fuel to the remote feeding sites. You estimate it takes one truck to service every 500 people you feed each month.  It costs you \$2,600 to pay for the fuel, drivers and maintenance it takes to operate one truck for one month. Depreciation adds an additional \$14,000 to your monthly expenses.

Direct costs for food are \$3.95 per person per day. The Western Nations Alliance has agreed to pay you \$4.10 per day for each person you feed. For budgeting purposes, assume there are 30 days in a month. Finally, the Soaring Foundation has pledged \$50,000 per month to support the West African Relief effort.

Problem 2 (10 points):

Since 1965, Save The Dogs Incorporated (STDI) has rescued dogs from local animal shelters, provided them with temporary homes and placed them with new families. STDI is a virtual organization that relies largely on a network of volunteers and a web site to deliver its services.

After running deficits during its last three years of operation, STDI wants to prepare a formal operating budget for fiscal year ending June 30, 2015. The executive director believes STDI will rescue a total of 750 puppies and adult dogs during the fiscal year ending June 30, 2015. The mix of animals and adoption fees are projected to be as follows.

Ten percent of those who adopt dogs from STDI have historically donated an average of \$85.00 more than the organization’s suggested adoption fees. The executive director believes that trend is likely to continue during fiscal year 2015. STDI also receives donations and sells merchandise through its web site. In a typical week, STDI will receive six donations of \$25 and sell merchandise valued at \$60 to eight web visitors. Merchandise costs STDI an average of 40% of its sale price. Board members have also agreed to donate a total \$5,000 to STDI during fiscal year ending June 30, 2015.

STDI ’s single largest expense was providing the dogs in its care with veterinary services. Every animal that STDI rescued is given a preliminary veterinary exam. Seventy-five percent of the animals taken from animal shelters need to be spayed or neutered prior to placement. In addition, many of the volunteers who were responsible for evaluating animals at the shelters have a soft spot in their hearts for dogs with special health problems. On average, ten percent of the animals taken from shelters needed extensive veterinary services. The table below shows the average cost and demand for each of the three major categories of veterinary services.

STDI would like to take every dog from a shelter and immediately place it in a temporary foster home until it is adopted.  Unfortunately, foster homes are not always available. Historically, 40% of the dogs STDI rescues spend an average of 8 days in a commercial kennel at a cost to STDI of \$10 per day before a foster home becomes available.

STDI has a full time Executive Director who is paid \$27,500 per year and a part-time bookkeeper who is paid \$15 per hour and works an average of six hours per week. The organization rents a 500 square foot office at a cost of \$10 per square foot per year to house its staff and web servers. Two web servers will be purchased on January 1st 2015 and put into service immediately. The servers will cost \$4,500. The servers have a useful life of three years and will have no residual value. Phone costs average \$3,000 per year. High-speed Internet access costs STDI \$2,500 per year.

A. Prepare an operating budget for STDI for fiscal year 2015. Also, denote in the far right hand column if the item is variable for fixed.

B. Prepare a flexible budget reflecting a 10% decrease in overall adoptions volume. Assume that the proportion of puppies and adult dogs remains constant, as does the proportional demand for veterinary services.

Problem 3 (5 points):

The University of Wisconsin, Urban Life Research Center (this organization is fictional) needs to prepare a budget for a research proposal to do an in-depth study of the Cook County’s after-school programs.  The County is willing to pay \$35,000 for each site studied, up to 15 sites.  A report must be submitted within a year of the start of the project.

Regardless of the number of sites, the Center will need a primary researcher at \$80,000 per year and two associate researchers at \$45,000 each per year to do the study.  Supervising the site studies is the responsibility of the associate researchers.  Each associate researcher will be able to supervise up to eight sites.  Research assistants are needed to transcribe field notes and provide support for the associate researchers.  These part-time research assistants are each paid \$6,000 and are only able to support three site studies each.  The Center must budget 30% of the salary of the primary and associate researchers for fringe benefits.  Rent for the Center is \$2,000 per month.  Office equipment cost \$90,000 with a useful life of three years and has no salvage value.

Based on experiences the Center estimates that it will need \$3,500 for supplies. Researchers will have to travel to each research site.  Each trip will cost \$25 and the center expects that 40 trips will be made to each site during the study.

Prepare a flexible budget of revenues and expenses for a study that includes 9 sites, 12 sites, and 15 sites.

Problem 4 (5 points):

Smallville Children Services (SCS) provide adoptions and foster care services. SCS bills the State for its foster care services under a fee for service contract. SCS charges adoptive parents a sliding scale fee based on family income for their adoption services. Fourth quarter 2014 revenues are anticipated to be as follows:

OctoberNovemberDecember

Foster Care\$400,000\$420,000\$460,000

SCS finds that it collects 40% of the amounts billed to the State for foster care services in the month of service with the balance collected in the month following service. Adoption fees are collected in the month that they are earned.

SCS is planning to acquire three minivans at a total cost of \$75,000 in November 2014. The purchase of the minivans will be financed with a \$75,000 installment loan, with the first payment due in December.

SCS anticipates incurring salaries and fringe benefit expenses of \$480,000 each month. Salaries and fringe benefit expenses are paid as incurred. Monthly depreciation expense is \$15,000. SCS plans to use food and office supplies at a total expense of \$18,000 during the month of November 2014, but cash payments to suppliers are expected to be \$16,000.

Assume that SCS has a cash balance of \$40,000 on October 31, 2014.

Prepare a cash budget for the month of November 2014.

 Subject Business Due By (Pacific Time) 05/07/2014 04:00 pm
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