Concept explainers
Operating expenses budget and an income statement (Learning Objective 2)
Evansville Preschool operates a not-for-profit morning preschool that operates eight months of the year. The preschool has 190 kids enrolled in its various programs. The preschool’s primary expense is payroll. Teachers are paid a flat salary each of the eight months as follows:
Teachers of two-day program | $ 428 per month |
Teachers of three-day program | $ 657 per month |
Teachers of four-day program | $ 856 per month |
Teachers of five-day program | $1,075 per month |
Preschool director’s salary | $1,500 per month |
Evansville Preschool has 9 two-day program teachers, 4 three-day program teachers, 5 four-day program teachers, and 4 five-day program teachers. The preschool also has a director.
In addition to the salary expense, the preschool must pay federal payroll taxes (FICA taxes) in the amount of 7.65% of salary expense. The preschool leases its facilities from a local church, paying $4,050 every month it operates. Fixed operating expenses (telephone, Internet access, bookkeeping services, and so forth) amount to $890 per month over the nine-month school year. Variable monthly expenses (over the eight-month school year) for art supplies and other miscellaneous supplies are $13 per child. Revenue for the entire nine-month school year from tuition, registration fees, and the lunch program is projected to be $241,300.
Requirements
- 1. Prepare Evansville Preschool’s monthly operating expenses budget. Round all amounts to the nearest dollar.
- 2. Using your answer from Requirement 1, create Start Evansville Preschool’s
budgeted income statement for the entire eight-month school year. You may group all operating expenses together. - 3. Start Evansville is a not-for-profit preschool. What might the preschool do with its projected income for the year?
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Managerial Accounting (5th Edition)
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