Budget

 Recently, you were hired as the Assistant Facility Manager for the Columbia Arena Company. You were having your morning briefing session with your boss who informed you that the individual in charge of creating the facility's annual budget just quit. You quickly told the boss you are an expert at budgeting and could easily complete the task.

The Columbia Arena Company formed in 2021 and uses the accrual basis of accounting.

1. Using the company’s 2021 budget (provided below), develop a pro forma operating budget for 2022 based on the following revenue and expense estimates:

It is forecasted that costs and expenditures will change in 2022 as follows:

• Merchandise COGS, General and Administrative, Event Costs, and Maintenance will increase by 2.5%.
• Concessions COGS will increase by 4.5%.
• Utilities will increase by 8.0%.
• Personnel will increase by 2.5%.
• Insurance, Contract Services, Marketing, Management Fee, and Reserve are forecasted to remain the same.

The arena is expected to generate cash receipts in 2022 as follows:

• All rent will increase by 5.5%.
• Concessions Gross will increase by 4.0%.
• 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 2.3%.

2. After you have calculated the 2022 budget (Problem 1), your boss asks you to revise the budget so that overall revenues increase by 4% and operating expenses decrease by 1.5%.

Based on current trends in facility management, what revenues do you anticipate can be increased? What expenses can be decreased? You need to provide a detail explanation (with supporting evidence) for why you chose the specific revenues and expenses. Remember some revenues and expenses may be fixed and cannot be changed (meaning they are a fixed costs or a fixed revenue stream).

Use the 2021 budget and create a new 2022 budget based on the revenue increases and expense decreases outlined in Problem 2. If your ideas for changes in revenue and expenses are different from your boss, you need to include a rationale for differences (i.e., if you suggest they will increase more, decrease less, etc., you need to explain why….see previous paragraph).

Your submission should include an Excel file as well as a Word document explaining your decisions.