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 2010–2011 academic year, Mission College had a gift and grant budget of $1,200,000 and that all of these funds had been committed to students by May 15, 2010. The college had capacity to enroll up to 250 additional students.
Required:
Explain why and how flexible budgeting should be applied by the management of Mission College in administering its gift and grant awards budget.