Static versus Flexible Budgeting (Service Firm)

Peterson Management, Inc., is a small firm that sponsors time-management seminars in hotels throughout the country. It sponsors 20 two-day seminars during the year for a tuition fee of $200 per student. The following is a budget for a single seminar:

Required:
Bruce Peterson, owner of the company and the speaker at the seminars, would be pleased with an income of $4,275 per seminar. With 20 seminars per year, the company’s annual income would be $85,500. He is concerned, however, that every seminar may not have 40 participants. Prepare a flexible budget, showing what annual income would be if 10, 20, 40, or 50 people enroll in each seminar.

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Peterson Management, Inc. Budget per Seminar Expected enrollment Tuition per person Revenue per seminar Variable costs: Catering ($25 per person) Books and handouts ($10 per person) Fixed costs: Airfare.... Hotel rental fee Advertising Other .. Total costs Expected income 40 x $200 $8,000 $1,000 400 425 600 1,000 300 $3,725 $4,275