Budgeting This budget is a static budget. The variable components are based on the number of students, and in this budget the amount of students is assumed to be fixed throughout the year. The budget does include three different student levels, but this reflects sensitivity analysis, not a flexible budget that changes over the course of the year. To make the budget flexible, the school would need to make changes to the different elements of the budget as the school year progresses. That is entirely possible the way this budget is structured, but the possibility of converting it to a flexible budget does not make it a flexible budget.

The total revenue per student excluding grants is taken by adding up the non-grant revenues per student: $6,063.06

The total expenses per student depends on how many students. At the 120 student assumption, total expense per student are $4,518; at the 100 student level the total expenses per student are $5,283; and at the 66 student level the total expenses per student are $7,646.

4. It appears that most of these expenses are necessary. Technology enhancement might be something that is not necessary. Advertising can be cut, but that might affect the number of students. Grass removal might not be...

Many items could, however, be subject to reduction.
5. The school is viable. The (non-grant) revenues per student are $6,063.06. Variable expenses per student are $654.50, leaving a contribution margin of $5,408.56. The total fixed costs are $470,817. This gives a breakeven point of 87.05 students, or 81 students.

6. There are a few benefits of preparing this budget. The first is that it allows the school to determine its breakeven point. The school also has the ability to adjust levels of expenses and subject the budget to a sensitivity analysis (the enrollment figures are a form of this as well). The budget gives management information on what are the revenue and cost drivers at the school, allowing for better decision making. These budgets also help to provide mechanisms for variance analysis, and they are used to help the school make better choices about its purchasing and other expenses.

7. This budget is likely to be used for a control function. The budget provides levels by which actual performance can be judged. When managers know what the deviations are, they can focus on finding ways to ensure that negative…