CHAPTER 9 Budgeting 391To assist with the development of the operating expenses budget, illustrative example 9.3 provides an extract
of actual operating expenses from the statement of profit or loss for the 3 month period to 31 December, 2016.
ILLUSTRATIVE EXAMPLE 9.3Advantage Tennis Coaching actual operating expenses extract 2016
Advantage Tennis Coaching
Operating expenses extract from the statement of profit or loss for the 3 month period ended
31 December 2016Promotions and web maintenance expense
Equipment depreciation expense
Utilities expenses
Court leases at Tennyson Tennis Centre
Insurance expense
Supplies expense
Interest expense$2 000
4 000
3 200
15 000
3 250
1 500
750
Total operating expenses $29 700A budget of $25 000 is to be allocated for promotion and web maintenance. The purchase of a mini
bus in June is planned. Depreciation on the bus and equipment is charged on a straight-line basis. The
bus will cost and $80 000 have a zero residual value in 8 years’ time. In line with the lease agreement
for tennis court hire, $6700 will be payable each month in 2017. As a result of the expected growth in
numbers in the junior squad ATC’s insurer has revised the premium for 2017 to $20 000. Given that
increase in numbers and in the costs of electricity and gas, it is estimated that the utilities bills will
increase by 25 per cent next year. Supplies expense should be in line with 2016 actual expenditure for
3 months. The loan payable of $50 000 incurs interest at 6 per cent.
After meeting with his accountant, Nicholas developed the budgeted statement of profit or loss for
2017 as shown in illustrative example 9.4.
ILLUSTRATIVE EXAMPLE 9.4Advantage Tennis Coaching budgeted statement of profit or loss
Advantage Tennis Coaching
Budgeted statement of profit or loss for year ended 31 December 2017
Sales
Junior squad fees
Elite junior squad fees
Adult fitness squad fees
Tournaments (net)$ 234 000
84 500
90 000
40 000
Total revenue 448 500
Operating expenses:
Promotion and web maintenance
Salaries
Equipment depreciation (4000 × 4) + (80 000 – 0)/8 × 6/12)
Utilities ($3200 × 1.25 × 4)
Lease ($6700 × 12)
Insurance
Supplies (1500 × 4)
Interest expense25 000
200 000
21 000
16 000
80 400
20 000
6 000
3 000
Total operating expenses 371 400
Budgeted profit $ 77 100