Jim Smith has recently been appointed as the head teacher of Mayfield School in Midshire. The age of the pupils ranges from 11 years to 18 years. For many years, Midshire County Council was responsible for preparing and reporting on the school budget. From June, however, these responsibilities passed to the head teacher of Mayfield School. You have recently accepted a part-time appointment as the accountant to Mayfield School, although your previous accounting experience has been gained in commercial organizations. Jim Smith is hoping that you will be able to apply that experience to improving the financial reporting procedures at Mayfield School.
The last budget statement prepared by Midshire County Council is reproduced below. It covers the ten months to the end of May and all figures refer to cash payments made.

Write a memo to Jim Smith. Your memo should:
(a) Identify four weaknesses of the existing statement as a management report;
(b) Include an improved outline statement format showing revised column headings and a more meaningful classification of costs which will help Jim Smith to manage his school effectively (figures are not required);
(c) Give two advantages of your proposed format over the existing format.
Data
The income of Mayfield School is based on the number of pupils at the school. Jim Smith provides you with the following breakdown of student numbers.

Jim also provides you with the following information relating to existing pupils:
€¢pupils move up one school-year at the end of July;
€¢for those pupils entering year 6, there is an option to leave the school. As a result, only 80 per cent of the current school year 5 pupils go on to enter school-year 6;
€¢of those currently in school-year 6 only 95 per cent continue into school-year 7;
€¢pupils currently in school-year 7 leave to go on to higher education or employment;
€¢the annual income per pupil is £1200 in years 1 to 5 and £1500 in years 6 to 7.
The new year 1 pupils come from the final year at four junior schools. Not all pupils, however, elect to go to Mayfield School. Jim has investigated this matter and derived accurate estimates of the proportion of final year pupils at each of the four junior schools who go on to attend Mayfield School.
The number of pupils in the final year at each of the four junior schools is given below along with Jim's estimate of the proportion likely to choose Mayfield School.

(a) Forecast the number of pupils and the income of Mayfield School for the next year from August to July.
(b) Assuming expenditure next year is 5 per cent more than the current annual budgeted expenditure, calculate the budgeted surplus or deficit of Mayfield School for next year.

Midshire County Council Mayfield School Statement of school expenditure against budget 10 months ending May Under/ over spend Total Expenditure Budget to budget for to date date year Teachers full-time Teachers part-time Other employee expenses Administrative staff Caretaker and cleaning Resources (books, etc.) Repairs and maintenance Lighting and heating Rates Fixed assets: fumiture and 1680 250 35 238 5 792 69 137 49 267 1682500 2250 Cr 638 2019 000 41 520 18 000 82 140 68 646 120 000 0 80 064 23 826 34600 15000 9208 Cr 68450 57205 7938 Cr 687 120 673 100000 20673 458 59 720 23 826 0 66720 19855 458 7000 Cr 3971 84 721 100000 15 279 Cr 120 000 equipment Stationery, postage and phone Miscellaneous expenses Total 1 945 9450 2140 477 0 6750 2151080 1945 2700 10603 Cr 8 100 2581 296 Mayfield School: Student numbers as at 31 May Current number of pupils School year Age range 11-12 12-13 13-14 14-15 15-16 16-17 17-18 300 350 325 360 380 240 220 Total number of students Number in finalProportion choosing Junior School year at 31 May Mayfield School Ranmoor Hallamshire Broomhil Endcliffe 60 120 140 80 0.9 0.8 0.9 0.5