Question
Clumbia Alpha School, a private high school, is preparing a planned income statement for the coming academic year ending August 31,2013. Tuition revenues for the
Clumbia Alpha School, a private high school, is preparing a planned income statement for the coming academic year ending August 31,2013.
Tuition revenues for the past two years ending August 31 were as follows:2012 $800,000; and2011,$850,000. Total expenses for 2012were $790,000 and in 2011 were $811,000. No tuition rate changes occurred in 2011or 2012, nor are any expected to occur in 2013. Tuition revenue is expected to be $790,000 for 2013.
Requirement
1. | What net income should be planned for 2013, assuming that the implied cost behavior remains unchanged? |
Let's begin by determining the variable expense percentage.
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| Variable expense | |||
| / |
| = | percentage | |||
| / |
| = |
| % |
Now calculate the fixed expenses using data from 2012.
Total expenses | - | Variable expenses | = | Fixed expenses |
| - |
| = |
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Now calculate the net income that is planned for 2013.
Revenue | - | Variable expenses | - | Fixed expenses | = | Net income |
| - |
| - |
| = |
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