Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 2

Flexible budgeting One of the significant costs for a nonpublic college or university is student aid in the form of gifts and grants awarded to students because of academic potential or performance, and/or financial need. Gifts and grants are only a part of a financial aid package, usually accounting for no more than 20% of the total package. Federal and state grants, other scholarships, loans, and income from work constitute the rest of financial aid, but these funds are not provided by the institution. Assume that for the 2016-2017 academic year, Wonder College had a gift and grant budget of $900,000 and that all of these funds had been committed to students by May 15, 2016. The college had capacity to enroll up to 200 additional students.
Required:
Explain why and how flexible budgeting should be applied by the management of Wonder College in administering its gift and grant awards budget.