Question

Suppose you are the controller of Nebraska State University. The university president, Lisa Larsson, is preparing for her annual fund-raising campaign for 20X7–20X8. To set an appropriate target, she has asked you to prepare a budget for the academic year. You have collected the following data for the current year (20X6–20X7):

	Undergraduate Division	Graduate Division
Average salary of faculty member	$58,000	$58,000
Average faculty teaching load in semester credit-hours per year (eight undergraduate or six graduate courses)	24	18
Average number of students per class	30	20
Total enrollment (full-time and part-time students)	3,600	1,800
Average number of semester credit-hours carried each year per student	25	20
Full-time load, semester hours per year	30	24

For 20X7–20X8, all faculty and staff will receive a 6% salary increase. Undergraduate enrollment is expected to decline by 2%, but graduate enrollment is expected to increase by 5%.

The 20X6–20X7 budget for operation and maintenance of facilities was $500,000, which includes $240,000 for salaries and wages. Experience so far this year indicates that the budget is accurate. Salaries and wages will increase by 6% and other operating costs will increase by $12,000 in 20X7–20X8.

The 20X6–20X7 and 20X7–20X8 budgets for the remaining expenditures are as follows:

	20X6–20X7	20X7–20X8
General administrative	$500,000	$525,000
Library
Acquisitions	150,000	155,000
Operations	190,000	200,000
Health services	48,000	50,000
Intramural athletics	56,000	60,000
Intercollegiate athletics	240,000	245,000
Insurance and retirement	520,000	560,000
Interest	75,000	75,000

Tuition is $92 per credit hour. In addition, the state legislature provides $780 per full-time-equivalent student. (A full-time equivalent is 30 undergraduate hours or 24 graduate hours.) Full-tuition scholarships are given to 30 full-time undergraduates and 50 full-time graduate students.

Revenues other than tuition and the legislative apportionment are as follows:

	20X6–20X7	20X7–20X8
Endowment income	$200,000	$210,000
Net income from auxiliary services	325,000	335,000
Intercollegiate athletic receipts	290,000	300,000

The chemistry/physics classroom building needs remodeling during the 20X7–20X8 period. Projected cost is $575,000.

Prepare a schedule for 20X7–20X8 that shows, by division, (a) expected enrollment, (b) total credit hours, (c) full-time-equivalent enrollment, and (d) number of faculty members needed.

Calculate the budget for faculty salaries for 20X7–20X8 by division.

Calculate the budget for tuition revenue and legislative apportionment for 20X7–20X8 by division.

Prepare a schedule for President Larsson showing the amount that must be raised by the annual fund-raising campaign.

Answer 1

Schedule for 20X7-20X8

a) Expected Enrollment

Undergraduates : Number of Students.in 20X6-20X7 = 3600

Expected Decrease = 2%

Therefore no. of Students expected in 20X7-20X8 = 3600*98%

Graduates : No.of students in 20X6-20X7 = 1800

Expected increase = 5%

Therefore enrollment expected in 20X7-20X8 = 1800*105%

= 1890 students.

b) Total Credit Hours

Undergraduates

Avg. credit hours each year per student = 25

Estimated no. of students for 20X7-20X8 = 3528

No.of credit hrs. for the year for undergraduates = 3528*25 = 88200 hours

Graduates

Avg. credit hours each year per student = 20

Estimated no. of students for 20X7-20X8 = 1890

No.of credit hrs. for the year for graduates = 1890*20 = 37800 hours

Therefore total credit hours required = Cr.hrs. of undergraduates + Cr.hrs. of Graduates

= 88200 + 37800 = 126000 credit hours.

c) Full Time equivalent enrollment

(Assumed - not sure)

Undergraduates

Total Cr. hours = 88200

Full time eqv = 30hrs per student

Therefore , full time equivalent enrollment = 88200/30

= 2940 students

Graduates

Total Cr. hours = 37800

Full time eqv = 24hrs per student

Therefore , full time equivalent enrollment = 37800/24

  = 1575 students

d) No.of faculty members needed

Undergraduates

Avg. faculty load = 24 credit hours

Total credit hours = 88200

No. of faculty req. = 88200/24= 3675 members

Graduates

Avg. faculty load = 18 credit hours

Total credit hours = 37800

No. of faculty req. = 37800/18 = 2100 members

Budget for Faculty Salaries for 20X7-20X8 by Division

Undergraduate

Salary in 20X6-20X7 = $58000

Expected increase = 6%

Expected salary for 20X7-20X8 = 58000*106% = $61480

Graduate

Salary in 20X6-20X7 = $58000

Expected increase = 6%

Expected salary for 20X7-20X8 = 58000*106% = $61480

Budget for Tuition revenue

Undergraduate :

No.of Cr. hrs. = 88200 hrs

Fee / hr = $92

Therefore revenue = 88200*92

= $8114400

Graduate :

No.of Cr. hrs. = 37800 hrs

Fee / hr = $92

Therefore revenue = 37800*92

= $3477600

Total revenue from tuituion fees = 8114400 + 3477600 = $11592000

Revenue from legislative appotionment

Undergraduates

Legislative apportionment per full time eqv student = $780

No. of full time eqv student = 2940

Revenue = $780*2940

= $2293200

Graduates

Legislative apportionment per full time eqv student = $780

No. of full time eqv student = 1575

Revenue = $780*1575

= $1228500

Total revenue from Legislative apportionment = 2293200+ 1228500

= $3521700

Schedule showing the amount that must be raised

Expenses

Faculty Salaries = 61480*2 = 122960

Salaries and wages of Operating staff = 240000*106%=254400

Other operating Expenses = 260000+12000= 272000

Projected cost of remodelling classroom building = 575000

Remaining expenses ( Total calculated from above table) =1870000

Total Expenses =3094360

Less : Revenue

Tuition fees

Legislative Apportion

Other revenue =(845000)