Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks) a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately S4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities. Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities, However, there were no plans to hire an additional employee. The workload associated with other 2 activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb the extra work. At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income. recent legislation and regulations were expected to have an impact on contributions, investment policy and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900 Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors Other incidental out-of-pocket expenses are estimated to be $200 Fees charged for one-day seminars in the area ranged from $50 to 5495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. 3 Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation 1.449,667 Counseling 157,621 Infant clinics 312,007 Education 426,234 Drug abuse 345,821 Visiting nurses 267,910 Other 23,280 Total program expenses 2,982,540 Support expenses Administration (1) 480,326 Dues to national association 24,603 Fundraising 182.523 Other 47,862 Total support expenses 735,314 Total expenses 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses. Salares are for Ms. Brown, Ms. Torres and five staff members. Ms. Brown earns a salary that is 50% higher than Ms. Torres Exhibit 2: Budget for Camp Disney Staff salaries and benefits $ Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total $ 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 5 Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks] a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately $4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities, Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged. CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities. However, there were no plans to hire an additional employee. The workload associated with other 2 the extra work. activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income, recent legislation and regulations were expected to have an impact on contributions, investment policy, and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. 1 estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments. Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900. Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors. Other incidental out-of-pocket expenses are estimated to be $200. Fees charged for one-day seminars in the area ranged from $50 to $495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues $ Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation Counseling Infant clinics Education Drug abuse Visiting nurses Other Total program expenses 1,449,667 157,621 312,007 426,234 345,821 267,910 23,280 2,982,540 Support expenses Administration (1) Dues to national association Fund raising Other Total support expenses Total expenses 480,326 24,603 182,523 47,862 735,314 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses Salares are for Ms. Brown, Ms. Torres and five staff members, Ms. Brown earns a salary that is 50% higher than Ms. Torres $ Exhibit 2: Budget for Camp Disney Staff salaries and benefits Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 $ 5 Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks] a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately $4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities, Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged. CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all, of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities. However, there were no plans to hire an additional employee. The workload associated with other 2 activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb the extra work. At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income, recent legislation and regulations were expected to have an impact on contributions, investment policy, and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. I estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments. Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900. Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors. Other incidental out-of-pocket expenses are estimated to be $200 Fees charged for one-day seminars in the area ranged from $50 to $495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues $ Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation Counseling Infant clinics Education Drug abuse Visiting nurses Other Total program expenses 1,449,667 157,621 312,007 426,234 345,821 267,910 23,280 2,982,540 Support expenses Administration (1) Dues to national association Fund raising Other Total support expenses Total expenses 480,326 24,603 182,523 47,862 735,314 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses Salares are for Ms. Brown, Ms. Torres and five staff members, Ms. Brown earns a salary that is 50% higher than Ms. Torres $ Exhibit 2: Budget for Camp Disney Staff salaries and benefits Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 S Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks) a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately S4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities. Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities, However, there were no plans to hire an additional employee. The workload associated with other 2 activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb the extra work. At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income. recent legislation and regulations were expected to have an impact on contributions, investment policy and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900 Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors Other incidental out-of-pocket expenses are estimated to be $200 Fees charged for one-day seminars in the area ranged from $50 to 5495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. 3 Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation 1.449,667 Counseling 157,621 Infant clinics 312,007 Education 426,234 Drug abuse 345,821 Visiting nurses 267,910 Other 23,280 Total program expenses 2,982,540 Support expenses Administration (1) 480,326 Dues to national association 24,603 Fundraising 182.523 Other 47,862 Total support expenses 735,314 Total expenses 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses. Salares are for Ms. Brown, Ms. Torres and five staff members. Ms. Brown earns a salary that is 50% higher than Ms. Torres Exhibit 2: Budget for Camp Disney Staff salaries and benefits $ Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total $ 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 5 Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks] a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately $4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities, Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged. CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities. However, there were no plans to hire an additional employee. The workload associated with other 2 the extra work. activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income, recent legislation and regulations were expected to have an impact on contributions, investment policy, and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. 1 estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments. Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900. Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors. Other incidental out-of-pocket expenses are estimated to be $200. Fees charged for one-day seminars in the area ranged from $50 to $495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues $ Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation Counseling Infant clinics Education Drug abuse Visiting nurses Other Total program expenses 1,449,667 157,621 312,007 426,234 345,821 267,910 23,280 2,982,540 Support expenses Administration (1) Dues to national association Fund raising Other Total support expenses Total expenses 480,326 24,603 182,523 47,862 735,314 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses Salares are for Ms. Brown, Ms. Torres and five staff members, Ms. Brown earns a salary that is 50% higher than Ms. Torres $ Exhibit 2: Budget for Camp Disney Staff salaries and benefits Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 $ 5 Required: Read Disney Foundation and prepare a report providing the following information, along with basic explanations as to the numbers being used and rationale for your choices: 1. What weekly fee should be charged for campers? Provide all the details and justify your answer. Remember what our mission is. (35 marks) a. Consider all the cost described and explain what costs are not being included and why? 2. If you were going to charge $100 per participant for the seminar, what is your break even point? (30 marks] a. What is the purpose of running the seminar? b. What fee should be charged for the seminar? 3. Suppose the registration is so low that the seminar can't possibly make money, what then? (20 marks) a. Think about how these costs change at 30 days before the seminar? Disney Foundation Under the terms of the will of Walter Disney, a wealthy Denver philanthropist, the Disney Foundation was created in 1954. His bequest was approximately $4 million and its purpose was broadly stated: income from the funds was to be used for the benefit of the people of Denver and nearby communities. In the next 60 years, an array of services were developed by the trustees. These included three childcare clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program, a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Denver and surrounding cities, Disney Foundation was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Disney bequest. Major sources of revenue were fees from clients, contributions, and grants from city, state, and federal governments. The most recent operating statement is shown in exhibit 1. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fundraising expenses. Seventy percent of administration costs were for personnel. The remaining 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two new activities. One was a summer camp, whose attendees would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both ventures, it was necessary to establish the fee that should be charged. CAMP ROCK The camp, which was called Camp Rock, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all, of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Connie Torres, the foundation's financial vice president, obtained information on costs from the American Camping Association and from two camps in the vicinity. Although the camp could accommodate at least 60 children, she decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, she believed there would be no difficulty in enrolling this number. The budget for camp was prepared on this basis and is shown in Exhibit 2. Ms. Torres discussed this budget with Julie Brown, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were reasonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation's central office, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid, pay bills, and do other bookkeeping and accounting work. There was no good way of estimating how many full-time equivalents this work would require. Five staff members worked in the central office administration, earning an average annual salary of about $36,000. As a rough guess, about half a person-year might be involved in these activities. However, there were no plans to hire an additional employee. The workload associated with other 2 activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb the extra work. At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging, but no pay. No allowance for the value of their services was included in the budget. Finally, the budget did not include an amount for depreciation of the camp's facilities. Lakefront property was valuable. If the camp and its buildings were sold to a developer, perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory developments. (Although these organizations were exempt from income taxes, except on unrelated business income, recent legislation and regulations were expected to have an impact on contributions, investment policy, and personnel policies, among other things.) The purposes of the seminar were described as partly to generate income and partly to provide a service for smaller welfare organizations. In early spring, Ms. Brown had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Ms. Torres at that time. I estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel, and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments. Audiovisual equipment will be rented at a cost of $100. There will be two instructors, and each will be paid a fee of $500. Printing and mailing of promotional material will cost $900. Each participant will be given a notebook containing relevant material. Each notebook will cost $10 to prepare, and 60 copies of the notebook will be printed. I will preside, and one Disney staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors. Other incidental out-of-pocket expenses are estimated to be $200 Fees charged for one-day seminars in the area ranged from $50 to $495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating customer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Denver area at a fee in the range of $150 to $250, including a meal. Disney Foundation Exhibit 1: Operating Statement For the most recent year ended June 30 Revenues $ Fees from clients Grants from government agencies Contributions Investment earnings Total revenues 1,024,437 1,899,543 790,277 24,553 3,738,810 Expenses Program expenses Rehabilitation Counseling Infant clinics Education Drug abuse Visiting nurses Other Total program expenses 1,449,667 157,621 312,007 426,234 345,821 267,910 23,280 2,982,540 Support expenses Administration (1) Dues to national association Fund raising Other Total support expenses Total expenses 480,326 24,603 182,523 47,862 735,314 3,717,854 Net Income $ 20,956 (1) Divided 70%/30% between salaries and other administative expenses Salares are for Ms. Brown, Ms. Torres and five staff members, Ms. Brown earns a salary that is 50% higher than Ms. Torres $ Exhibit 2: Budget for Camp Disney Staff salaries and benefits Food Operating supplies Telephone and utilities Insurance Rental of equipment Contingency and miscellaneous (5%) Total 90,000 19,000 4,000 9,000 15,100 7,000 7,200 151,300 S