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Practice Problems 1. The Columbia Arena Company Formed in 2015 and uses the accrual basis of accounting. Using the company's 2015 budget, provided in Exhibit 6.10, develop a pro forma operating budget for 2016 based on the following revenue and expense estimates.

Answer A and B

Practice Problem 2 After you have calculated the 2016 budget, suppose your boss asks you to revise it so that overall revenues increase by 4% and operating expense decrease by 1.5%

Answer A and B

5. How planning budgeting differ from zero-based budgeting? 6. What are the strengths and weaknesses of program planning budgeting 7. What are the strengths and weaknesses of zero-based budgeting? 8. How does modified zero-based budgeting differ from zero-based budgeting? 9. What are the advantages and disadvantages of modified zero-based budgeting? (10. In team sport (professional or college), which form of budgeting should be used? PRACTICE problems 1. The Columbia Arena Company formed in 2015 and uses the accrual basis of accounting. Using the company's 2015 budget, provided in Exhibit 6.10, develop a pro forma operating budget for 2016 based on the following rev- enue and expense estimates: 165 PART Financial Management 6.10 a. It Sample budget for Practice Problem 1 EXHIBIT 2015 OPERATING BUDGET 465,000 729,000 $ $ b. Revenues. Rent from Sports Teams Rent from Events Equipment Rent Concessions (Gross) Merchandise (Gross) Advertising and Sponsorships Naming Rights $ $ 27,600 $ 2,512,000 $ 244,600 580,400 327.000 150,560 781,700 549,360 654,000 482,010 $ $ $ $ Box Office Suite Revenue Club Seat Revenue Ticket Fees 2. $ $ 7,503,230 Parking Total Revenues Less COGS: Concessions COGS Merchandise COGS $ 1,507,300 $ 122,300 $ 1,629,600 Total COGS $ 5,873,630 Gross Profit $ Operating Expenses: Personnel G&A $ $ Non-reimbursed Event Costs Utilities $ Insurance $ 981,000 218,000 163,500 490,500 272,500 369,800 119,900 218,000 109,000 $ $ Maintenance Contract Services Marketing and Promotion Management Fee Reserve $ $ $ Total Operating Expenses 163,500 Operating Income (Loss) $ 3,105,700 $ 2,767,930 It is forecasted that costs and expenditures will change in 2016 as follows: - Merchandise COGS, G&A, Event Costs, and Maintenance will - Concessions COGS will increase by 4.5%. - Personnel will increase by 2.5%. Insurance, Contract Services, Marketing, Management Fee, and Reserve are forecasted to remain the same. b. The arena is expected to generate cash receipts in 2016 as follows: increase by 2.5% a. Budgeting CHAPT he department. The budget projects a $1.4 million shortfall. and $24 million in fiscal year 2015. FC Utilities will increase by 8.0%. . All rent will increase by 5.5%. . Concessions Gross will increase by 4.0%. Merchandise Gross, Suite Revenue, Club Seating Revenue, Advertising Revenue, and Naming Rights are forecasted to remain the same. Box Office, Parking, and Ticket Fee revenues will decrease by 2.3%. 2. After you have calculated the 2016 budget, suppose your boss asks you to revise it so that overall revenues increase by 4% and operating expenses decrease by 1.5%. a. Based on current trends in facility management, what revenues do you anticipate can be increased? What expenses can be decreased? b. Use the 2016 budget that you created in Problem 1 and create a new 2016 budget based on the revenue increases and expense decreases outlined in Problem 2 and your work on Problem 2a. Coastal Atlantic University e intercollegiate athletics department at Coastal Atlantic University U) has major budgeting issues. For the 2015 fiscal year, the versity's Board of Trustees has approved a $20.4 million budget CASE ANA Beyond its athletics department, the serious budgeting challenges. Due to a and declining state support, CAU will haw CA to cover the may grow higher, to as high as $39.5 G Columbia Arena Company Pro Forma Operating Budget - 2016 2015 2016 $ $ $ $ Revenues: Rent from Sports Teams Rent from Events Equipment Rent Concessions (Gross) Merchandise (Gross) Advertising and Sponsorships Naming Rights Box Office Suite Revenue Club Seat Revenue Ticket Fees Parking $ $ $ $ $ $ $ $ 465,000 729,000 27,600 2,512,000 244,600 580,400 327,000 150,560 781,700 549,360 654,000 482,010 Total Revenues $ 7,503,230 $ Less COGS: Concessions COGS Merchandise COGS $ $ 1,507,300 122,300 Total COGS $ 1,629,600 $ Gross Profit $ 5,873,630 $ Operating Expenses: Personnel G&A Non-reimbursed Event Costs Utilities Insurance Maintenance Contract Services Marketing and Promotion Management Fee Reserve $ $ $ $ $ 981,000 218,000 163,500 490,500 272,500 369,800 119,900 218,000 109,000 163,500 $ $ $ $ $ Total Operating Expenses $ 3,105,700 $ Operating Income (Loss) $ 2,767 930 $ Calibri (Body) 11 A- A Paste B I U A 26 X A B C D E F G 2a. Based on current trens in facility managemnt, what revenues do you anticipate can be increased? List 3 and the reason why: 1 2 3 What expenses can be decreased? List 3 and the reason why: 1 2 3 CH 6 Practice Problem 1 Gh 6 Practice Problem pa CHS Practice Problem G Columbia Arena Company Pro Forma Operating Budget - 2016 2015 2016 $ $ $ $ Revenues: Rent from Sports Teams Rent from Events Equipment Rent Concessions (Gross) Merchandise (Gross) Advertising and Sponsorships Naming Rights Box Office Suite Revenue Club Seat Revenue Ticket Fees Parking $ $ $ $ $ $ $ $ 465,000 729,000 27,600 2,512,000 244,600 580,400 327,000 150,560 781,700 549,360 654,000 482,010 Total Revenues $ 7,503,230 $ Less COGS: Concessions COGS Merchandise COGS $ $ 1,507,300 122,300 Total COGS $ 1,629,600 $ Gross Profit $ 5,873,630 $ Operating Expenses: Personnel G&A Non-reimbursed Event Costs Utilities Insurance Maintenance Contract Services Marketing and Promotion Management Fee Reserve $ $ $ $ $ 981,000 218,000 163,500 490,500 272,500 369,800 119,900 218,000 109,000 163,500 $ $ $ $ $ Total Operating Expenses $ 3,105,700 $ Operating Income (Loss) $ 2,767 930 $