Brook Sorenson, the owner of a nine-hole golf course on the outskirts of Ottawa, Ontario, is considering the proposal that the course be illuminated and operated at Management is studying whether to close the Wallpaper department because of the changing market and accompanying loss. If the Wallpaper department is dropped the following changes are expected to occur:

• The space vacated by the Wallpaper department can be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet.

• Sales of carpet is expected to increase by $120,000 with the introduction of the high-end carpet the carpet divisions overall contribution margin ratio will increase by five (5) percent points.

• Irvine will increase advertising expenses by $25,000 to promote its new line of high-end stereo equipment.

• Irvine can cut the Wallpaper departments fixed costs by 40 percent. Remaining fixed costs will continue to be incurred.

• Customers who purchased wallpaper often bought paint and paint supplies. If the Wallpaper department were to close than it is anticipated that sales in the paint and supplies department would fall by 20 percent.

night. Ms. Sorenson purchased the golf course four years ago for $90,000. Last years revenue for the 28-week season was $24,000 and total expenses were $16,500. The required investment in lighting the course is $20,000 consisting of 150 lamps and

Future Stars Preschool daycare operates a not-for-profit morning daycare that operates nine months of the year. Future Stars has 161 kids enrolled in its various programs. Future Stars primary expense is payroll. Teachers are paid a flat salary for each of the nine months as follows:

Salary Data
Teachers of two-day program	$ 438/month
Teachers of three-day program	$ 651/month
Teachers of four-day program	$ 872/month
Teachers of five-day program	$1,040/month
Directors salary	$1,250/month

Future Stars has eight, two-day program teachers, five, three-day program teachers, seven, four-day program teachers, and three, five-day program teachers. There is one overall Director of the organization.

In addition to the salary expense, Future Stars must pay payroll taxes in the amount of 7.65% of salary expense. Future Stars leases its facilities from a local church, paying $2,200 per month plus 10.75% of monthly tuition revenue. Fixed operating expenses (telephone, internet access, bookkeeping services, and so forth) amount to $890 per month over the nine-month school year. Variable monthly expenses (over the nine-month school year) for art supplies and other miscellaneous supplies are $10 per

Brook Sorenson, the owner of a nine-hole golf course on the outskirts of Ottawa, Ontario, is considering the proposal that the course be illuminated and operated at Management is studying whether to close the Wallpaper department because of the changing market and accompanying loss. If the Wallpaper department is dropped the following changes are expected to occur:

• The space vacated by the Wallpaper department can be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet.

• Sales of carpet is expected to increase by $120,000 with the introduction of the high-end carpet the carpet divisions overall contribution margin ratio will increase by five (5) percent points.

• Irvine will increase advertising expenses by $25,000 to promote its new line of high-end stereo equipment.

• Irvine can cut the Wallpaper departments fixed costs by 40 percent. Remaining fixed costs will continue to be incurred.

• Customers who purchased wallpaper often bought paint and paint supplies. If the Wallpaper department were to close than it is anticipated that sales in the paint and supplies department would fall by 20 percent.

night. Ms. Sorenson purchased the golf course four years ago for $90,000. Last years revenue for the 28-week season was $24,000 and total expenses were $16,500. The required investment in lighting the course is $20,000 consisting of 150 lamps and a generator.

child. Revenue for the entire nine-month school year from tuition and registration fees is projected to be $291,865. The monthly tuition revenue is $26,710.

Required:

1. Prepare Future Stars Preschool daycare monthly operating budget. Round all amounts to the nearest dollar.

2. Using your answer from (1.), create Future Stars Preschool daycares budgeted income statement for the entire nine-month school year assuming that revenue for the nine-month period is what has been stated in the problem.

3. As Future Stars is a not-for-profit preschool, what might Future Stars do with its projected net income for the year?