Prepare Cash Budget for Nonprofit Organization: United Business Education, Inc. (UBE), is a nonprofit organization that sponsors
Question:
Prepare Cash Budget for Nonprofit Organization: United Business Education, Inc. (UBE), is a nonprofit organization that sponsors a wide variety of management seminars throughout the United States. In addition, it researches improved methods of educating and motivating business executives. The seminar activity is largely supported by fees, and the research program from member dues. UBE operates on a calendar-year basis and is in the process of finalizing the budget for next year. The following information has been taken from approved plans that are still tentative at this time: Seminar program: Revenue. The scheduled number of programs should produce $12 million of revenue for the year. Each program is budgeted to produce the same amount of revenue. The revenue is collected during the month the program is offered. The programs are scheduled so that 1 2 percent of the revenue is collected in each of the first five months of the year. The remaining programs, accounting for the remaining 40 percent of the revenue, are distributed evenly through the months of September. October, and November. No programs are offered in the other four months of the year. Direct seminar costs are made up of three segments:
1. Instructor's fees, which are 70 percent of the seminar revenue. are paid in cash in the month following the seminar. The instructors are considered independent contractors and are not eligible for UBE employee benefits.
2. Facilities fees total $5.6 million for the year. They are the same for each program and are paid in the month the program is given.
3. Annual promotional costs of $1 million are spent equally in all months except June and July, when there is no promotional effort.
The research program requires total grant expense of $3 million for next year, which is expected to be paid out at the rate of $500,000 per month during the first six months of the year (that is, January through June).
Salaries and other UBE costs: Office lease. Annual amount of $240,000 paid monthly at the beginning of each month.
General administrative costs (telephone, supplies, postage, and so forth). $1.5 million annually or $125,000 a month.
Depreciation expense. $240,000 a year. General UBE promotion. Annual cost of $600,000, paid monthly.
Salaries and benefits:
Employee benefits amount to $240,000 or 25 percent of annual salaries. Except for the pension contribution, the benefits are paid as salaries are paid. The annual pension payment of $24,000, based on 2.5 percent of salaries (included in the total benefits and 25 percent rate), is due by April 15 of next year.
Other information:
Membership income. UBE has 100,000 members, each of whom pays an annual fee of $100. The fee for the calendar year is invoiced in late June. The collection schedule is as follows.
Capital expenditures. The capital expenditures program calls for $510,000 in cash payments to be spread evenly over the first five months of next year (that is, January through May).
Cash and temporary investments on January 1 of next year are expected to be $750,000.
Required:
a. Prepare a budget of the annual cash receipts and disbursements for UBE, Inc.. for next year.
b. Prepare a cash budget for UBE, Inc.. for January of next year.
c. Using the information you developed in requirements
(a) and (b), identify two important operating problems of UBE. Inc.
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