ACCT 231: MANAGERIAL ACCOUNTING TEAM CASE 3 – WINEGAR UNIVERSITY This team case is designed to provide students with experience in (1) designing flexible budgets; (2) applying managerial accounting tools to a real organization; (3) working effectively in teams; and (4) practicing business communication skills (interpersonal, verbal, and written). Requirements 1. All team members are provided general information about Winegar University. 2. Together, the team is responsible for creating a master budget. 3. Each member chooses one role (Revenue Manager, Operations Manager, or Student Affairs Manager). 4. Each member is provided information specific to his/her role/department. 5. Each member is responsible for creating the budget specific to his/her assigned department. In most cases, the managers need to obtain information from other managers in order to complete their own department’s budget. The team will then work together to complete the required master budget, which is comprised of the: Revenue Budget, Operations Budget, and Budgeted Income Statement. Instructions, Sequence of Events, Points: By the end of class on Thursday, May 24: 1. Access the general information about Winegar University. 2. As a team, and using Excel, recreate Tables 4 and 5 (Note: you must use absolute, relative and mixed cell referencing in Excel in order to efficiently and effectively design a flexible budget). 3. As a team, show/send the instructor evidence of successfully recreating Tables 4 and 5 to earn 5 points. (Note: test your flexible budget by obtaining the results in the ‘Analyses of Budget Scenarios’). 4. Each member takes on a role (see above) and receives their department-specific information. During class on Tuesday, May 29: 1. Each member comes prepared to present his/her department’s budget, and the choices he/she made. 2. As a team, decide on budget assumptions and submit these to the instructor to earn 5 points. 3. As a team, and using Excel, work together on the required master budget. Due before class on May 31: 1. As a team, upload to Angel the required master budget matching the team’s budget assumptions. 2. As a team, come prepared to present the master budget to another team to earn up to 5 points. 3. As a team, come prepared to assess another team’s master budget and choices to earn up to 5 points. (Note: each presentation should be about 10 minutes + 5 minutes Q&A + 5 minutes to evaluate) Rubric to evaluate another team’s budget and presentation (assume your team is the President and Trustees) Please evaluate (circle) the other team’s budget and presentation along the following criteria: Disagree ------------------------ Agree This team convincingly explained their rationale for their chosen budget assumptions resulting in the surplus/deficit. 1 2 3 4 5 This team’s flexible budget adequately recomputed the surplus/deficit based on our team’s budget assumptions. 1 2 3 4 5 This team satisfactorily responded to our questions 1 2 3 4 5 These members seemed to work effectively in their team. 1 2 3 4 5 These team members practiced good communication skills. 1 2 3 4 5 Sum of total points from the above criteria ____ out of 25 ÷ 5 criteria = ____ points out of 5 possible points Please add comments in support of the resulting team case points: Winegar University1 Winegar University confronts the increasingly hostile budgetary environment presented by the most significant economic recession since the Great Depression. State assisted universities have limited means of compensating for decreasing state and federal funding. Underlying the harsh budgeting environment are complexities such as tuition pricing and price discrimination, elasticity of tuition pricing, admissions acceptance standards, and faculty to student ratio. INTRODUCTION Test time is here, or so it seemed, as Percy Bradshaw prepared to enter the Board of Trustees Conference Room at Winegar. This year, May 31 has been selected as the date for the annual skewering. The event never failed to create butterflies as Percy braced himself for the litany of questions – perhaps it was a test – that were sure to bombard him once inside the room. The examiners were the Board Members and President of Winegar and Percy had been relentlessly playing their predicable queries over in his mind as the moment of truth approached. Will we have to raise tuition again this year? Why? By how much? Will it cost us students? What if we don’t – worst and best case scenarios? What are our alternatives to raising tuition? Percy knew his answers would dramatically affect the pocketbooks and future prospects for thousands of Winegar stakeholders2 including students, faculty, staff, local businesses and potential employers. Percy Bradshaw was Winegar’s Vice President of Finance, and hence responsible for assimilating revenue and cost estimates amidst increasingly pessimistic state revenue projections into budgetary recommendations for the President and Board of Trustees. Summer: The Season of Budgetary Unrest As in each of summers past, Percy monitored the state revenue projections and budget proposals emanating from the legislature in the state capital. Not surprisingly, eleventh hour haranguing between the state’s Senate and House of Representatives over the amount of money budgeted for higher education was preventing him from once again finalizing a budget for the coming academic year. Winegar’s President was anxiously awaiting the budget so he could present it to the Board of Trustees for final approval. This meant, with the beginning of fall classes only 12 weeks away, Winegar could not present prospective students or their parents with their tuition fees. The tuition fees, to a large extent, determine the number of students enrolling and thus determine the major revenue stream that would support the university’s operations. Because there was much uncertainty about the higher education budget from the state, Percy decided to prepare budgets based on various scenarios that would result from a number of interrelated factors. 1 Adopted from “Balancing the State College Budget: Why Must Tuition Increase and By How Much?,” Journal of the International Academy for Case Studies 17(5), November 5, 2011, p41-59, by D.A. Bradbard, D.K. Robbins, and C. Alvis. 2 Though Winegar University is a fictitious institution, all budget variable values are based on factual historical data. Winegar University page 2 Percy’s analysis this year is further complicated by the fact that the university’s expenses exceeded revenues by $4.5 million in the previous year. This loss was largely due to an unprecedented 5% rescission of state funds (with each state university being required to ‘give back’ to the state). While last year’s deficit was covered by using the university’s reserve funds, Winegar’s President clearly stated that using the reserve funds again was not an option for the upcoming academic year. However, Percy anticipates that increases in expenses will continue to challenge Winegar’s efforts to balance the budget in the upcoming year. The context of budgeting at public (state assisted) institutions of higher education Institutions such as Winegar have seen their level of state funding drop precipitously in recent years. As shown in Figure 1, Winegar’s level of state funding has fallen from 44% to 20% over the past 16 years. The dollar allocation is essentially the same now as it was in 1990 despite nearly two decades of increases in operating costs. In response to reduced state funding, CFOs at public universities have become more sophisticated in the establishment of tuition fees. The primary objective is to set tuition at a level that retains current students, attracts new students, and provides revenue dollars sufficient to cover costs under pessimistic budgetary scenarios. Percy anticipates that for the upcoming year, tuition and fees as a percentage of revenues wil increase to well over 47 percent. Figure 1. A comparison of Winegar’s sources of revenue for the academic years 1989-90 and 2006-2007. Also underpinning budgetary scenarios was the university’s strategic objectives for the next 5-10 years as show in Figure 2. Percy would have to integrate these objectives into his budgetary scenarios; in essence, they provide constraints or limits to his range of budgeting options. Percy’s challenge then is how to balance a complex set of issues and stakeholder tradeoffs. Figure 2 – Winegar’s Strategic Objectives for the next 5-10 years Winegar University page 3 Budget Forecast Variables In order to prepare a master budget, Percy must first consider three types of variables: basic variables (e.g., number of faculty and staff, number of in-state and out-of-state students, etc.), revenue source variables (e.g., state appropriation, tuition, other revenue sources, etc.), and major expense variables (e.g., salaries, utilities, etc.). Table 1 presents 10 years of state appropriation data for Winegar and all higher education institution in the state and indicates that the overall allocation as a percent of total state revenue continues to decline to about $20 million in 2006- 2007, which represents about 20% of the university’s base (see Figure 1) of $100 million. The $20 million appropriation is before the state rescinded 5% (or $1 million) in 2007-2008. The best case for the coming year’s allocation would be a 5% increase to $21 million. Worse case would be a 5% rescission or $19 million. The most likely estimate is $20 million. Once the appropriation has been finalized by the state legislature, tuition schedules are set. Tuition rates are also a function of the number of students that enroll in August. Table 2 presents tuition rates for in-state and out-of-state students for the last 10 years. In the face of dwindling state appropriations, Winegar has increased tuition by 13-15% for each of the past three years. Percy recognizes tuition increases affect the number of enrollees, though demand for Winegar degrees has exhibited remarkable inelasticity over the period of the tuition increases. Winegar University page 4 Despite this historical inelasticity, Percy’s intuition and research suggest that once tuition increases reach a certain threshold, there is a significant decrease in enrollments. Thus, Percy must be careful not to overprice tuition and chase off current students. Table 3 presents estimates of student enrollment retention at different levels of tuition price for both in-state and out-of-state students. These estimates are based on tuition pricing models and demand curves for similarsized, peer universities. The table shows a modest drop in demand for tuition increases of less than 10%, but significant declines for more extreme tuition increases. These estimates apply to continuation rates for current students only. Percy thinks that diminished ability to admit the targeted 1,500 new freshmen due to elasticity can be offset by relaxing the admissions criteria – though this would be considered a short term or emergency response that would not significantly affect the overall academic quality of the student body. Additional considerations factor into projecting student tuition revenue including: full and partial scholarships, out-of-state tuition waivers or reciprocity agreements, and work study programs. As a result, many students receive a tuition discount of some form and the university nets far less than full tuition for each student. Besides student tuition revenue, the university receives revenue from Pell Grants, endowed scholarship annual interest income, and athletic programs. Revenues from the latter three fluctuate widely. For example, with a significant downturn in the economy, there will be little or no annual investment interest income to be used to fund scholarships. This shortage will have to be covered elsewhere in the budget. Adding further complexity to the funds needed for scholarships and tuition waivers may include high achieving students with strong SATs, athletic scholarships, out-of-state students receiving waivers, and the expected increase in the number of both in-state and out-of-state students. Consistent with conservative accounting practices, budgets typically itemize the tuition and other revenues in full and then itemize related offset expenses in full on the expense side of the budget. Basic Input Variables Table 4 presents the basic input variables and their initial values. The following assumptions have been made to simplify the model building process and still make it reflective of current numbers: (1) all students pay the same (potentially discounted) tuition (see above), which include all student fees, room, and board for one year (two semesters) as well as tuition; (2) Winegar assumes a budget basis of $100 million to project non-tuition revenue and non-personnel and benefits expenses (similar to 2007-2008); (3) tuition revenues account for 59% of the revenue budget (up from 44% in Figure 1); (4) the ratio of out-of-state to in-state tuition is maintained at 1.72 (i.e., $17,564/$10,210); (5) 0% rescission rate; (6) personnel and benefits account for 79% of the operations budget (up from 73% in Figure 3); and (7) about an 18.4:1 student-faculty ratio. Winegar University page 5 Revenue Source Input Variables. Winegar has four sources of non-tuition revenues. Auxiliary sources include housing, food services, and health care fees. Food services and health care have been outsourced and the fees for these services have been set according to the terms of the licensing agreement. Housing fees are based on the features and comfort of the dormitory, as well as the related operating costs. Contracts for the bookstore, vending services, user fees for the athletic facilities are generally multi-year and not subject to change on an annual basis. A portion of grant funds awarded to faculty and administrators by external parties go to Winegar to cover university overhead costs. Other revenues come from proceeds from summer instructional camps (academic, athletic, etc.) and from vending sales and health center proceeds. Expense Variables. Figure 3 presents Winegar’s major expense categories which include: personnel and benefits (faculty and staff salaries, faculty and staff fringe benefits), service and supplies (from outsourcing food preparation and dormitory management, office supplies, physical plant supplies, ground maintenance supplies, etc.), scholarships and waivers (see discussion on tuition discounts above), and utility costs (electric, water and sewer, and gas). Figure 3 – Winegar’s expenditures for 2007-2008 Winegar University page 6 Analysis of Initial Budget and Scenarios Table 5 presents the initial budget output variables that appear right after the input variables. Note that a 5% rescission would result in a $1,409,900 deficit. Hence, Percy’s real interest is to determine the budget impact of different scenarios. For example: 1. Increasing both in-state and out-of-state tuition each by $100 and $200 with no change in enrollments results in a surplus/(deficit) of $269,300 and $948,500, respectively. 2. Increasing out-of-state enrollment (while increasing out-of state tuition) by 100 students ($100) and 200 students ($200) results in a surplus/(deficit) of $174,611 and $1,512,456, respectively. Note the number of faculty changes to a strict 18.0:1 student-faculty ratio. 3. Increasing out-of-state enrollment (while increasing out-of-state tuition) of 100 students ($100) and 200 students ($200) with a 5% rescission results in a surplus/(deficit) of ($825,389) and $512,456, respectively. Budget Presentation In addition to the prepared budget scenarios and his responses to the tuition questions presented at the onset of this case, Percy had prepared and rehearsed responses to the following  What are the major assumptions upon which you base your recommended budget scenario?  Where should we set our in-state and out-of-state tuition to ensure that we will not have to tap into the emergency reserve fund?  Under your recommended tuition pricing, how many out-of-state and in-state students will not be able to afford to continue next semester?  How critical to your budget is increasing the 15 percent of out-of-state students (Table 2)? Equipped with his analysis of the budgeting environment and rehearsed responses, Percy felt confident he will be able to quickly respond to questions regarding components of the recommended budget for the coming year. He will pass his test. Will you?

ACCT 231: MANAGERIAL ACCOUNTING
TEAM CASE 3 – WINEGAR UNIVERSITY
This team case is designed to provide students with experience in (1) designing flexible budgets; (2)
applying managerial accounting tools to a real organization; (3) working effectively in teams; and
(4) practicing business communication skills (interpersonal, verbal, and written).
Requirements
1. All team members are provided general information about Winegar University.
2. Together, the team is responsible for creating a master budget.
3. Each member chooses one role (Revenue Manager, Operations Manager, or Student Affairs Manager).
4. Each member is provided information specific to his/her role/department.
5. Each member is responsible for creating the budget specific to his/her assigned department. In most
cases, the managers need to obtain information from other managers in order to complete their own
department’s budget. The team will then work together to complete the required master budget, which
is comprised of the: Revenue Budget, Operations Budget, and Budgeted Income Statement.
Instructions, Sequence of Events, Points:
By the end of class on Thursday, May 24:
1. Access the general information about Winegar University.
2. As a team, and using Excel, recreate Tables 4 and 5 (Note: you must use absolute, relative and mixed
cell referencing in Excel in order to efficiently and effectively design a flexible budget).
3. As a team, show/send the instructor evidence of successfully recreating Tables 4 and 5 to earn 5
points. (Note: test your flexible budget by obtaining the results in the ‘Analyses of Budget Scenarios’).
4. Each member takes on a role (see above) and receives their department-specific information.
During class on Tuesday, May 29:
1. Each member comes prepared to present his/her department’s budget, and the choices he/she made.
2. As a team, decide on budget assumptions and submit these to the instructor to earn 5 points.
3. As a team, and using Excel, work together on the required master budget.
Due before class on May 31:
1. As a team, upload to Angel the required master budget matching the team’s budget assumptions.
2. As a team, come prepared to present the master budget to another team to earn up to 5 points.
3. As a team, come prepared to assess another team’s master budget and choices to earn up to 5 points.
(Note: each presentation should be about 10 minutes + 5 minutes Q&A + 5 minutes to evaluate)
Rubric to evaluate another team’s budget and presentation (assume your team is the President and Trustees)
Please evaluate (circle) the other team’s budget and presentation along the following criteria:
Disagree ------------------------ Agree
This team convincingly explained their rationale for their
chosen budget assumptions resulting in the surplus/deficit. 1 2 3 4 5
This team’s flexible budget adequately recomputed the
surplus/deficit based on our team’s budget assumptions. 1 2 3 4 5
This team satisfactorily responded to our questions 1 2 3 4 5
These members seemed to work effectively in their team. 1 2 3 4 5
These team members practiced good communication skills. 1 2 3 4 5
Sum of total points from the above criteria ____ out of 25 ÷ 5 criteria = ____ points out of 5 possible points
Please add comments in support of the resulting team case points:
Winegar University1
Winegar University confronts the increasingly hostile budgetary environment presented by the
most significant economic recession since the Great Depression. State assisted universities have
limited means of compensating for decreasing state and federal funding. Underlying the harsh
budgeting environment are complexities such as tuition pricing and price discrimination,
elasticity of tuition pricing, admissions acceptance standards, and faculty to student ratio.
INTRODUCTION
Test time is here, or so it seemed, as Percy Bradshaw prepared to enter the Board of Trustees
Conference Room at Winegar. This year, May 31 has been selected as the date for the annual
skewering. The event never failed to create butterflies as Percy braced himself for the litany of
questions – perhaps it was a test – that were sure to bombard him once inside the room. The
examiners were the Board Members and President of Winegar and Percy had been relentlessly
playing their predicable queries over in his mind as the moment of truth approached.
Will we have to raise tuition again this year?
Why?
By how much?
Will it cost us students?
What if we don’t – worst and best case scenarios?
What are our alternatives to raising tuition?
Percy knew his answers would dramatically affect the pocketbooks and future prospects for
thousands of Winegar stakeholders2 including students, faculty, staff, local businesses and
potential employers. Percy Bradshaw was Winegar’s Vice President of Finance, and hence
responsible for assimilating revenue and cost estimates amidst increasingly pessimistic state
revenue projections into budgetary recommendations for the President and Board of Trustees.
Summer: The Season of Budgetary Unrest
As in each of summers past, Percy monitored the state revenue projections and budget proposals
emanating from the legislature in the state capital. Not surprisingly, eleventh hour haranguing
between the state’s Senate and House of Representatives over the amount of money budgeted for
higher education was preventing him from once again finalizing a budget for the coming
academic year. Winegar’s President was anxiously awaiting the budget so he could present it to
the Board of Trustees for final approval. This meant, with the beginning of fall classes only 12
weeks away, Winegar could not present prospective students or their parents with their tuition
fees. The tuition fees, to a large extent, determine the number of students enrolling and thus
determine the major revenue stream that would support the university’s operations. Because
there was much uncertainty about the higher education budget from the state, Percy decided to
prepare budgets based on various scenarios that would result from a number of interrelated
factors.
1 Adopted from “Balancing the State College Budget: Why Must Tuition Increase and By How Much?,” Journal of
the International Academy for Case Studies 17(5), November 5, 2011, p41-59, by D.A. Bradbard, D.K. Robbins,
and C. Alvis.
2 Though Winegar University is a fictitious institution, all budget variable values are based on factual historical data.
Winegar University page 2
Percy’s analysis this year is further complicated by the fact that the university’s expenses
exceeded revenues by $4.5 million in the previous year. This loss was largely due to an
unprecedented 5% rescission of state funds (with each state university being required to ‘give
back’ to the state). While last year’s deficit was covered by using the university’s reserve funds,
Winegar’s President clearly stated that using the reserve funds again was not an option for the
upcoming academic year. However, Percy anticipates that increases in expenses will continue to
challenge Winegar’s efforts to balance the budget in the upcoming year.
The context of budgeting at public (state assisted) institutions of higher education
Institutions such as Winegar have seen their level of state funding drop precipitously in recent
years. As shown in Figure 1, Winegar’s level of state funding has fallen from 44% to 20% over
the past 16 years. The dollar allocation is essentially the same now as it was in 1990 despite
nearly two decades of increases in operating costs. In response to reduced state funding, CFOs at
public universities have become more sophisticated in the establishment of tuition fees. The
primary objective is to set tuition at a level that retains current students, attracts new students,
and provides revenue dollars sufficient to cover costs under pessimistic budgetary scenarios.
Percy anticipates that for the upcoming year, tuition and fees as a percentage of revenues wil
increase to well over 47 percent.
Figure 1. A comparison of Winegar’s sources of revenue for the academic years 1989-90 and 2006-2007.
Also underpinning budgetary scenarios was the university’s strategic objectives for the next 5-10
years as show in Figure 2. Percy would have to integrate these objectives into his budgetary
scenarios; in essence, they provide constraints or limits to his range of budgeting options. Percy’s
challenge then is how to balance a complex set of issues and stakeholder tradeoffs.
Figure 2 – Winegar’s Strategic Objectives for the next 5-10 years
Winegar University page 3
Budget Forecast Variables
In order to prepare a master budget, Percy must first consider three types of variables: basic
variables (e.g., number of faculty and staff, number of in-state and out-of-state students, etc.),
revenue source variables (e.g., state appropriation, tuition, other revenue sources, etc.), and major
expense variables (e.g., salaries, utilities, etc.). Table 1 presents 10 years of state appropriation
data for Winegar and all higher education institution in the state and indicates that the overall
allocation as a percent of total state revenue continues to decline to about $20 million in 2006-
2007, which represents about 20% of the university’s base (see Figure 1) of $100 million. The
$20 million appropriation is before the state rescinded 5% (or $1 million) in 2007-2008. The best
case for the coming year’s allocation would be a 5% increase to $21 million. Worse case would
be a 5% rescission or $19 million. The most likely estimate is $20 million.
Once the appropriation has been finalized by the state legislature, tuition schedules are set.
Tuition rates are also a function of the number of students that enroll in August. Table 2 presents
tuition rates for in-state and out-of-state students for the last 10 years. In the face of dwindling
state appropriations, Winegar has increased tuition by 13-15% for each of the past three years.
Percy recognizes tuition increases affect the number of enrollees, though demand for Winegar
degrees has exhibited remarkable inelasticity over the period of the tuition increases.
Winegar University page 4
Despite this historical inelasticity, Percy’s intuition and research suggest that once tuition
increases reach a certain threshold, there is a significant decrease in enrollments. Thus, Percy
must be careful not to overprice tuition and chase off current students. Table 3 presents estimates
of student enrollment retention at different levels of tuition price for both in-state and out-of-state
students. These estimates are based on tuition pricing models and demand curves for similarsized,
peer universities. The table shows a modest drop in demand for tuition increases of less
than 10%, but significant declines for more extreme tuition increases. These estimates apply to
continuation rates for current students only. Percy thinks that diminished ability to admit the
targeted 1,500 new freshmen due to elasticity can be offset by relaxing the admissions criteria –
though this would be considered a short term or emergency response that would not significantly
affect the overall academic quality of the student body.
Additional considerations factor into projecting student tuition revenue including: full and partial
scholarships, out-of-state tuition waivers or reciprocity agreements, and work study programs.
As a result, many students receive a tuition discount of some form and the university nets far less
than full tuition for each student. Besides student tuition revenue, the university receives revenue
from Pell Grants, endowed scholarship annual interest income, and athletic programs. Revenues
from the latter three fluctuate widely. For example, with a significant downturn in the economy,
there will be little or no annual investment interest income to be used to fund scholarships. This
shortage will have to be covered elsewhere in the budget. Adding further complexity to the funds
needed for scholarships and tuition waivers may include high achieving students with strong
SATs, athletic scholarships, out-of-state students receiving waivers, and the expected increase in
the number of both in-state and out-of-state students. Consistent with conservative accounting
practices, budgets typically itemize the tuition and other revenues in full and then itemize related
offset expenses in full on the expense side of the budget.
Basic Input Variables
Table 4 presents the basic input variables and their initial values. The following assumptions
have been made to simplify the model building process and still make it reflective of current
numbers: (1) all students pay the same (potentially discounted) tuition (see above), which include
all student fees, room, and board for one year (two semesters) as well as tuition; (2) Winegar
assumes a budget basis of $100 million to project non-tuition revenue and non-personnel and
benefits expenses (similar to 2007-2008); (3) tuition revenues account for 59% of the revenue
budget (up from 44% in Figure 1); (4) the ratio of out-of-state to in-state tuition is maintained at
1.72 (i.e., $17,564/$10,210); (5) 0% rescission rate; (6) personnel and benefits account for 79%
of the operations budget (up from 73% in Figure 3); and (7) about an 18.4:1 student-faculty ratio.
Winegar University page 5
Revenue Source Input Variables. Winegar has four sources of non-tuition revenues. Auxiliary
sources include housing, food services, and health care fees. Food services and health care have
been outsourced and the fees for these services have been set according to the terms of the
licensing agreement. Housing fees are based on the features and comfort of the dormitory, as
well as the related operating costs. Contracts for the bookstore, vending services, user fees for
the athletic facilities are generally multi-year and not subject to change on an annual basis. A
portion of grant funds awarded to faculty and administrators by external parties go to Winegar to
cover university overhead costs. Other revenues come from proceeds from summer instructional
camps (academic, athletic, etc.) and from vending sales and health center proceeds.
Expense Variables. Figure 3 presents Winegar’s major expense categories which include:
personnel and benefits (faculty and staff salaries, faculty and staff fringe benefits), service and
supplies (from outsourcing food preparation and dormitory management, office supplies,
physical plant supplies, ground maintenance supplies, etc.), scholarships and waivers (see
discussion on tuition discounts above), and utility costs (electric, water and sewer, and gas).
Figure 3 – Winegar’s expenditures for 2007-2008
Winegar University page 6
Analysis of Initial Budget and Scenarios
Table 5 presents the initial budget output variables that appear right after the input variables.
Note that a 5% rescission would result in a $1,409,900 deficit. Hence, Percy’s real interest is to
determine the budget impact of different scenarios. For example:
1. Increasing both in-state and out-of-state tuition each by $100 and $200 with no change in
enrollments results in a surplus/(deficit) of $269,300 and $948,500, respectively.
2. Increasing out-of-state enrollment (while increasing out-of state tuition) by 100 students
($100) and 200 students ($200) results in a surplus/(deficit) of $174,611 and $1,512,456,
respectively. Note the number of faculty changes to a strict 18.0:1 student-faculty ratio.
3. Increasing out-of-state enrollment (while increasing out-of-state tuition) of 100 students
($100) and 200 students ($200) with a 5% rescission results in a surplus/(deficit) of
($825,389) and $512,456, respectively.
Budget Presentation
In addition to the prepared budget scenarios and his responses to the tuition questions presented
at the onset of this case, Percy had prepared and rehearsed responses to the following
 What are the major assumptions upon which you base your recommended budget scenario?
 Where should we set our in-state and out-of-state tuition to ensure that we will not have to
tap into the emergency reserve fund?
 Under your recommended tuition pricing, how many out-of-state and in-state students will
not be able to afford to continue next semester?
 How critical to your budget is increasing the 15 percent of out-of-state students (Table 2)?
Equipped with his analysis of the budgeting environment and rehearsed responses, Percy felt
confident he will be able to quickly respond to questions regarding components of the
recommended budget for the coming year. He will pass his test. Will you?

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