Question

. Nonpersonnel expenses: You have been tasked with computing baseline budget targets for the upcoming budget cycle. Using Table 12.2 as your starting point, make the following adjustments:

(a) Solar panels have been installed with an expected 5% decrease in utility cost, for a savings of about $7,611.

(b) The inspection program was started in FY 2014 and had funding for three fourths of the year. All of the start-up costs were incurred in FY 2014. The annualized value of the inspection supplies for the remaining one fourth of the year is $81,899.

(c) Inflation is expected to be 2% except for utilities, which will see no increase, and for leased space, which by contract will have a 3% inflationary increase.

(d) The number of service units will not change.

(e) All departments are expected to achieve a 1% improvement in efficiency on all lines of cost and in all programs. (f) Budget baselines are not given out with cents, so round to the nearest dollar.

Table 12.2

Expense Type	FY14
General Supplies	60,532
Utilities	152,227
Leased Space	720,000
Food	50,571
Inspection Supplies	327,595
Inspection Startup	125,000
Total Nonpersonnel	1,144,925

Answer 1

Solution:

It is specified that "all departments are expected that to achieve a 1% improvement in efficiency on all lines to a cost and in all programs'.

In other words, there is a chance of cost reduction in all lines of cost due to improvement in efficiency.

E.g. If the cost is 1000 in the previous year and it would be 990 in current year because of 1% improvement in its efficiency.

Therefore, the cost should be multiplied by 99% assume this condition.