what is the analysis for the New City Band

New City Band

As the volunteer business manager for the New City Band (City Band), you are responsible for preparing the operating budget for the organization’s upcoming summer concert season. Each year, City Band presents up to 20 weekend performances, depending on weather conditions. The concerts are free to the public, but the band hangs a pot from the bandstand and people leave small donations in it. On average, City Band gets $100 in donations at each of its performances. In addition to donations, New City pays the band $3,000 per season plus $125 for each performance.

City Band also has a small endowment of $100,000 on which it expects to earn 3.5 percent in the coming fiscal year. City Band’s trustees have decided to use that money to pay for operating expenses if they need to.

City Band pays its conductor $3,000 for the summer season and has an insurance policy to protect it against any loss of equipment or damage to the bandstand. That policy costs the band $500 for the summer plus $25 per performance.

New music costs the band $200 per year. Following Generally Accepted Accounting Principles, the band recognizes music acquisitions as expenses in the year the music is acquired. In addition, City Band pays music publishers an average of $40 per concert for the rights to perform certain pieces in its repertoire. The band has an average of 60 musicians at each of its performances. Each musician is paid $5 per performance.

Question 1. Prepare an operating budget for City Band for the coming fiscal year assuming the band performs on each of its 20 scheduled concert dates.

Question 2. Prepare a flexible budget showing what would happen if the band could only perform on 80 percent of its scheduled concert dates.

Question 3. Calculate City Band’s totalcontribution margin per concert.

Lately, some of City Band’s older musicians have been having difficulty climbing the stairs to get up to the bandstand. In addition, there are two disabled musicians who play at all of the band’s rehearsals but are reluctant to play at the concerts because of the difficulty they have accessing the bandstand.

City Band’s trustees would like to accommodate both groups of musicians. They have gotten an estimate of $10,000 to make the bandstand accessible. You have lined up a 10-year, $500 per year grant from the State Office of Disabilities and a five-year, $750 per year grant from the Federal Office of the Aging to help pay for the modifications to the bandstand. In addition, the local chapter of the Knights of Columbus has offered to donate $1,500 toward the project.

Question 4. If City Band’s cost of capital is 6 percent, should it invest in the bandstand modifications based solely on the Knight’s donation and the proceeds from the grants? Support your answer with the appropriate time value of money calculations.

City Band expected to hold 20 concerts during its last summer concert season and pay an average of 60 musicians $5 per concert for their performances. At the end of the summer, the band had only been able to perform 16 times. The other four performances were rained out. Because of the shortened concert season, the trustees decided to pay the musicians who came to the concerts $6 per performance. On average, 55 musicians were at each performance.

Question 5. Calculate City Band’s total musicians’ stipend expense variance for the season. Indicate whether that variance was favorable or unfavorable. Calculate the portion of that variance that was due to volume. Indicate whether that variance was favorable or unfavorable. Calculate the portion of that variance that was due to quantity. Indicate whether that variance was favorable or unfavorable. Calculate the portion of that variance that was due to the rate paid to the musicians. Indicate whether that variance was favorable or unfavorable.

Hint: Be sure to add up the flexible (partial) variances to make sure that total equals the total variance you calculated directly.

Fido Rescue is building a new kennel and investing in new equipment. The kennel will cost $300,000 to build, and will last 20 years. It is expected that at the end of this period, it will be torn down and will have no remaining value. The associated equipment is expected to cost $50,000 and will have a useful life for the agency of 10 years. At that point it can be sold for 10 percent of its original value (for now, ignore discounting). Please show the mathematics used to calculate the answer to 10. Write out all steps and arithmetic formulas in detail.

Laverne purchased a new piece of equipment to be used in its new facility. The $385,000 piece of equipment was purchased with a $57,750 down payment and with cash received through the issuance of a $327,250, 7%, 5-year mortgage payable issued on January 1, 2017. The terms provide for annual installment payments of $79,813 on December 31. Prepare an installment payments schedule for the first five payments of the notes payable. Prepare the journal entry to record the mortgage loan Prepare the journal entries to record the installment payments.

1. The Port Authorities of New York and New Jersey estimate that the annual net revenues for the George Washington Bridge (GWB) will total $13M by the end of this year (t=1). At the end of three years (t=4) you expect a toll increase of 10%. Revenues will then remain constant for the next 6 years (year 4 through 10). Because the GWB is such an important artery for the New York City area, the Port Authorities would like to reinvest this revenue in a comprehensive maintenance and repair program. However, it will take two years (t=3) before plans and specifications can be developed and contracts awarded. What is the annual amount the Port Authorities should expect to spend for a five-year contract (uniform cash flows starting at the end of years 3 through 8)? The Port Authorities use a MARR of 7% for all public works projects.

A new business owner is thinking about a new project that will hopefully increase sales for the company. What advice can you give the owner about capital budgeting?

XYZ corp. is considering investing in a new machine. The new machine cost will $ 8,000 installed. Depreciation expense on the new machine will be $ 1,200 per year for the next five years. At the end of the fifth year XYZ expects to sell the machine for $3000. XYZ will also sell its old machine today that has a book value of $4000 for $4000. The old machine has depreciation expense of $800 per year and zero salvage value. Additionally, XYZ Corp expects that the new machine will increase its EBIT by $3000 in each of the next five years. Assuming that XYZ’s marginal tax rate is 21% and the projects cost of capital is 12%, What is the projects NPV? Round your final answer to two decimals.

Introducing a New Product

Consider a firm that is introducing a new product. The firm identified 300 potential customers whose probability of purchasing the product depends on age and gender as follows:

Using the spreadsheet of customer data provided, estimate the average number of product demand in each city: New York, Chicago, Los Angeles, and Seattle. (You may use any method you would like.)

A new study compares the effectiveness of a new pain medication to an existing pain medication and placebo. Which of the following best represents the dependent variable and the independent variable for this study?

1. 1. The dependent variable is the type of medication dispensed to the patient and the independent variable is the dosage of the medication dispensed to the patient.
   2. The dependent variable is a measure of pain experienced by the patient and the independent variable is a measure of side effects experienced by the patient.
   3. The dependent variable is a measure of pain experienced by the patient and the independent variable is the type of medication dispensed to the patient.
   4. The dependent variable is the type of medication dispensed to the patient and the independent variable is a measure of side effects experienced by the patient.

2. . When a researcher tried to test the association between the number of hours that a student studied with the percent grade that he/she obtained, Pearson Correlation Coefficient was calculated to be 0.82 (p = 0.001). Which of the following is the correct description of the relationship between study time and grades?

3. 1. As the amount of study time increased, the grades decreased.
   2. There is a negative relationship between study time and grades.
   3. There is a perfect positive relationship between study time and grades.
   4. As the amount of study time increased, the grades increased.

Your company is considering replacing an old machine with a new machine. The new machine will cost $1 million, will last for 5 years, and will have a salvage value of $200,000 at the end of five years. If the company replaces the old machine with the new machine, pre-tax operating costs will go down by $300,000 per year. The cost of the new machine ($1 million) will be depreciated over the 5 years life of the project using the straight line depreciation method to the $200,000 salvage value (i.e., the annual depreciation is $160,000). The old machine was purchased at a price of $800,000 five years ago, and it still has five years of useful life. It can be sold today for $200,000. However, after five years, the salvage value of the old machine will be zero. The cost of the old machine has also been depreciated using the straight line depreciation to the $0 salvage value (i.e. the annual depreciation is $80,000). The company's tax rate is 40%. The WACC for the project is 6.4%. What is the NPV of replacing the old machine with the new machine, and should the firm make the replacement?