Triple-F Health Club (Family, Fitness, and Fun) is a not-for-profit family-oriented health club. The club's board of directors is developing plans to acquire more equipment and to expand club facilities. The board plans to purchase about $25,000 of new equipment each year and wants to establish a fund to purchase the adjoining property in four or five years. The adjoining property has a market value of about $300,000. The Triple-F Health Clubs board of directors currently prepares the annual budget themselves without input from Jane and the six department managers and then allocates the budgeted dollars to each department. As part of your report, Jane would like you to discuss the advantages and disadvantages having Jane and department managers participate in the annual budget process. Jane and the department managers would prepare their own department budgets as a basis for developing Tripel-Fs annual budget in comparison to the current process where they have no input to the annual budget. The club manager, Jane Crowe, is concerned that the board has unrealistic goals in light of the club's recent financial performance. She has sought the help of a club member with an accounting background to assist her in preparing a report to the board supporting her concerns. The member reviewed the club's records, including the cash-basis income statement in Appendix A. Required Jane would like you to prepare a cash budget for 2024 for the Triple-H Health Club and explain any operating problems that this budget discloses for the Triple-H Health Club. Is Jane Crowe's concern that the board's goals are unrealistic justified?

Appendix A Triple-F Health Club Income Statement (Cash Basis) For the years ended October 31 2023 2022 Cash revenues: Annual membership fees $355,000 $300,000 Lesson and class fees 234,000 180,000 Miscellaneous 2,000 1,500 Total cash revenues $591,000 $481,500 Cash expenses: Manager's salary and benefits 36,000 36,000 Regular employees' wages and benefits 190,000 190,000 Lesson and class employees' wages and benefits 195,000 150,000 Towels and supplies 16,000 15,500 Utilities (heat and light) 22,000 15,000 Mortgage interest 35,100 37,800 Miscellaneous 2,000 1,500 Total cash expenditures $496,100 $445,800 Increase in cash $94,900 $35,700

Additional financial information is on the next page. 3 Other financial information as of October 31, 2023: 1. Cash in checking account $7,000 2. Petty cash $300 3. Outstanding mortgage balance $360,000 4. A/P, purchase of supplies and utilities $2,500 (due in November) 5. Exercise Equipment Purchase of exercise equipment during the year $25,000 Portion of purchase price paid in cash $10,000 Balance outstanding as of October 31, 2023 $15,000 6. Planned purchase of equipment, coming year $25,000 (cash) 7. Acquisition costs (2022): Land and building $600,000 Cash payment, at time of acquisition $120,000 Financing: Annual principal payment, November 1st $30,000 Plus: interest on unpaid balance, b-o-y 9.00% Current Year 2023 Year Property Was Acquired 2022 Years of mortgage amortization to date 1 years 8. Anticipated annual membership growth rate 3.00% 9. Membership fees increases: 2023 (actual) 15.00% 2024 (est.) 10.00% 10. Lesson and class fees growth in 2024 = same as growth rate experienced in 2023 11. Miscellaneous revenue growth rate, 2024 = same as growth rate in 2023 12. Expected increases in operating expenses: Hourly wage rates and the manager's salary 15.00% Towels and supplies, utilities, and misc. 25.00% Lesson and class employee cost increase of 30% (consistent with 30% increase in lesson and class fee growth) in addition to 15% hourly wage rate increase above.