Reference no: EM133476352
Budget Development
Question 1: The Columbia Arena Company formed in 2021 and uses the accrual basis of accounting. Using the company's 2021 budget (attached), provide an operating budget for 2022 based on the following revenues and expense estimates:
a. The Arena is expected to generate cash receipts in 2022 as follows:
• All rent will increase by 4.7%
• Concessions Gross will increase by 5.0%
• Merchandise Gross, Suite Revenue, Club Seating Revenue, Advertising Revenue, and Naming Rights are forecasted to remain the same
• Box Office, Parking, and Ticket Fee revenues will decrease by 2.7%
b. It is forecasted that costs and expenditures will change in 2022 as follows:
• Merchandise COGS, G&A, Event Costs, and Maintenance will increase by 4.7%
• Concessions COGS will increase by 7.5%
• Utilities will increase by 8.0%
• Personnel will increase by 1.5%
• Insurance, Contract Services, Marketing, Management Fee, and Reserve are forecasted to remain the same
Question 2: After you have calculated the 2022 budget, suppose your boss asks you to revise it so that overall revenues increase by 4% and operating expenses decrease by 1.5%. Use the 2022 budget that you created in Part I and create a new 2022 budget based on the revenue increases and expense decreases outlined by your boss. If you completed Part I correctly, then the revenues increased by 2% and the expenses by 3%; therefore you must increase revenues another 2% (to get to the overall increase goal of 4%) and decrease expenses by 4.5% to get to get to the overall decrease expense goal of 1.5%). Your calculations do not have to be exact - just hit the targets that your boss has indicated as closely as you can.