Operating and Flexible Budget
Since 2001, Rover Rescue Incorporated (RRI) has rescued dogs from local animal shelters, provided them with temporary homes and placed them with new families. RRI is a virtual organization that relies largely on a network of volunteers and a web site to deliver its services.
After running deficits during its first three years of operation, RRI wants to prepare a formal operating budget for fiscal year 2004. The executive director believes RRI will rescue a total of 750 puppies and adult dogs during 2004. The mix of animals and adoption fees are projected to be as follows.
Ten percent of those who adopt dogs from RRI have historically donated an average of $85.00 more than the organization’s suggested adoption fees. The executive director believes that trend is likely to continue during fiscal year 2004. RRI also receives donations and sells merchandise through its web site. In a typical week, RRI will receive six donations of $25 and sell merchandise valued at $60 to eight web visitors. Merchandise costs RRI an average of 40% of its sale price. Board members have also agreed to donate a total $5,000 to RRI during fiscal year 2004.
RRI’s single largest expense was providing the dogs in its care with veterinary services. Every animal that RRI rescued is given a preliminary veterinary exam. Seventy-five percent of the animals taken from animal shelters need to be spayed or neutered prior to placement. In addition, many of the volunteers who were responsible for evaluating animals at the shelters have a soft spot in their hearts for dogs with special health problems. On average, ten percent of the animals taken from shelters needed extensive veterinary services. The table below shows the average cost and demand for each of the three major categories of veterinary services.
RRI would like to take every dog from a shelter and immediately place it in a temporary foster home until it is adopted. Unfortunately, foster homes are not always available. Historically, 40% of the dogs RRI rescues spend an average of 8 days in a commercial kennel at a cost to RRI of $10 per day before a foster home becomes available.
RRI has a full time Executive Director who is paid $27,500 per year and a part-time intern who is paid $15 per hour and works an average of six hours per week. The organization rents a 500 square foot office at a cost of $10 per square foot per year to house its staff and web servers. Two web servers will be purchased on January 1st 2004 and put into service immediately. The servers will cost $4,500. The servers have a useful life of three years and will have no residual value. Phone costs average $3,000 per year. High-speed Internet access costs RRI $2,500 per year.
A. Prepare an operating budget for RRI for fiscal year 2004.
B. Prepare a flexible budget reflecting a 10% decrease in overall adoptions volume. Assume that the proportion of puppies and adult dogs remains constant, as does the proportional demand for veterinary services.
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