Question

For-Profit

20% of marketing expenses are fixed; the rest are variable; all other expenses are fixed

Next year they plan to double their fixed marketing expenses and as a result will increase ticket sales by 25%.

Gift shop sales vary directly with ticket sales; gift shop COGS is 50% of sales but is expected to grow to 55% of sales.

For-Profit Dinosour Museum
Income Statement
	This Yr	Next Yr Budget	Reason
Ticket sales	$600,000
Gift shop sales	200,000
Total sales	800,000
Salaries & benefits	100,000
Gift shop COGS	100,000
Marketing	100,000
Maintenance	90,000
Skeleton depreciation	20,000
Building lease	20,000
Utilities	40,000
Interest on debt	40,000
Total expense	510,000
Before tax income	290,000
Tax @ 40%	(116,000)	(165,000)
After-tax income	174,000	247,500

• complete next year's budgeted figures for each entity within the same Excel worksheet (yellow cells)
• include your reasoning for most of the budgeted figures (green cells)

Because of a bad recession, government grants were not cut by 50% but are eliminated completely for next year's budget and fundraising efforts—despite an increase in expenses—did not improve at all.

Answer 1

For-Profit Dinosour Museum
Income Statement
	This Yr	Next Yr Budget	Reason
Ticket sales	600000	750000	Increase by 25% due to increased fixed marketing expenses
Gift shop sales	200000	250000	Gift shop sales directly vary with ticket sales. Gift shop sales = (200000*(750000/600000))
Total sales	800000	1000000
Salaries & benefits	100000	100000	Nothing has been given about increase in this expenditure
Gift shop COGS	100000	137500	Gift shop COGS is going to be 55% of sales i.e. 55% of 250000
Marketing	100000	140000	20% of marketing expenses are fixed. Fixed marketing expenses are doubled now. Fixed marketing expneses = 100000*20%*2 =40000 Variable marketing expenses = (100000-20000)*(1000000/800000) = 100000 Total expenses = 40000+100000=140000
Maintenance	90000	90000	Nothing has been given about increase in this expenditure. As they are fixed, they remain the same
Skeleton depreciation	20000	20000	Nothing has been given about increase in this expenditure. As they are fixed, they remain the same
Building lease	20000	20000	Nothing has been given about increase in this expenditure. As they are fixed, they remain the same
Utilities	40000	40000	Nothing has been given about increase in this expenditure. As they are fixed, they remain the same
Interest on debt	40000	40000	Nothing has been given about increase in this expenditure. As they are fixed, they remain the same
Total expense	510000	587500
Before tax income	290000	412500
Tax @ 40%	-116000	165000
After-tax income	174000	247500