Group 2 Report London Youth Symphony Principles of Accounting

DORIA, Arniebelle M. FRANCISCO, Marvin P. GATCHALIAN, Andrea Mae D. HAUTEA, Lorenzo Martin J. UY, Reinhard D. Prof. Aaron C. Escartin August 8, 2013

I. Point of View The point of view of Daina Janitis will be taken for this case being that she is the President of the London Youth Symphony (LYS) with a vast experience and knowledge in managing the company. She also has access to data necessary in coming up with the solution. II. Statement of the Problem How will the London Youth Symphony financially sustain its operation for the upcoming year, 2005, through an increase in enrollment rates? III. Statement of the Objective/s: To establish a proposal that increases LYS enrollment rates (at least 40 enrollees) To maintain a minimum bank account balance of $30,000 and break even in 2006 To provide LYS all its necessary needs (e.g. labor force, equipment)

IV. Assumptions: 1. Most musicians are hired during Kiwanis Festival The hiring of additional musician caused inconvenience to the company as well as to the parents. The hiring resulted to an increase on LYS expense particularly on payment for the hired musicians and renting fees. 2. Annual Renting Fee LYS needs to rent Wortley Baptist Church annually in order to practice for its concerts and competitions. LYS uses the facility every Saturday 3. Relationship of Tuition Fee to Enrollment Rates The increase of LYS tuition fee resulted to a decrease on its enrollment rates. If LYS continues to increase its tuition fee for 2005, it may not reach the objective of the case to have at least 40 enrollees. 4. Young Strings enrollees Currently, there are 46 enrollees for the YS program. As stated in the case, this number is expected to remain constant with the same tuition fee price of $145 per student. 5. Discrepancy between number students listed in the program and paid enrollees

Although the program has sufficient number of students enrolled, not all of them pay. This results to a negative effect on LYS costs and income. V. Alternative Courses of Actions (ACA) The following are the Alternative Courses of Actions in solving the problem: 1. Full scholarship for 70 (maximum) LYS enrollees and 46 (maximum) YS enrollees 2. Assimilate with the FC and school bands/orchestra 3. Rebranding London Youth Symphony VI. Analysis of every ACAs ACA 1. Full scholarship for 70 (maximum) LYS enrollees and 46 (maximum) YS enrollees QUANTITATIVE ANALYSIS: Assumption for year 2005: Granting that the institution has a healthy financial status that could cover all its operating expenses for a year without charging tuition fees, it would be expected that a significant increase in the number of interested applicants would arise. However, to be able to grant full scholarships to all enrollees without incurring losses, LYS has to limit its total number of enrollees to 70 and YS to a maximum of 46 enrollees. This could be done by imposing a stringent screening tests for talent or mental aptitude or whatever criteria the institution decides upon. Basis of number of students for year 2006 Data at year 2002 Tuition Fee is $325 Number of enrollees are 50 students Data at year 2003 Tuition Fee is $425 Number of enrollees is 26 students 50-26/50*100% = 48% 425-325/425*100% = 24% 48%/24% = 2 it is elastic, demand is sensitive to price changes in LYS unlike in YS, which is inelastic.

For the year 2006, all enrollees of LYS should pay their tuition fees already. Basing from the graph, the 70 enrollees under LYS program should pay $240.00/enrollee and the 46 enrollees under YS program should pay $145.00. INCOME STATEMENT (for years ending August 31) REVENUES Tuition Fees London Youth Symphony Young Strings

2006

2005

16,800.00 6,670.00 23,470.00

GRANTS, SPONSORHIP AND DONATIONS Trillium Foundation London Arts Council Grant Corporate Sponsors LYS Musician Family Donations

5,000.00 700.00 5,700.00

12,000.00 5,000.00 700.00 17,700.00

FUNDRAISING Bingo Revenue Other Fundraiser

5,958.00 5,958.00

7,447.00 800.00 8,247.00

PERFORMANCE PROCEEDS LYS Concert Ticket Sales LYS Paid Performance YS Door Donations

6,476.00 5,740.00 413.00 12,629.00 17 47,757.00 2006

6,476.00 5,740.00 220.00 12,436.00 17 38,400.00 2005

INTEREST TOTAL REVENUES

EXPENSES Honoraria LYS Musical Directors Manager YS Conductor LYS Sectonal Coaches LYS Music Librarian Program Designer

12,528.00 6,000.00 4,500.00 1,550.00 1,000.00 25,578.00

12,528.00 6,000.00 4,500.00 1,550.00 1,000.00 25,578.00

Performance Expenses Hall & Equipment Rental Hired Musicians Out-of-Town Facility Finders Fee Souvenirs Programs Photography and Flowers Dress Rehearsals Pizza Supper LYS Reception Posters and Tickets

2,850.00 400.00 325.00 1,389.00 703.00 669.00 201.00 191.00 6,725.00

2,850.00 400.00 325.00 1,389.00 703.00 666.00 201.00 191.00 6,725.00

Insturments English Horn Instrument Damage Clarinet Timpani Mallets Bow for Double Bass

1,517.00 1,517.00

Fundraising Expenses Bingo Hall Rental and Expenses Bingo Licence Fee Other Fundraising Expenses

2,872.00 900.00 565.00 4,337.00

2,872.00 900.00 3,772.00

Uniform Expenses

LYS YS

1,200.00 1,200.00 2,400.00 3,019.00

1,200.00 1,200.00 2,400.00 2,931.00

Insurance (Aon Reeed Stenhouse Inc.) General and Administrative Expenses Telephone Website Advertising Photocopying Office Supplies Postage Post Office Box Rental Software Bank Charges and Cheques

480.00 200.00 167.00 473.00 465.00 175.00 1,960.00

-20.00 200.00 167.00 473.00 465.00 175.00 1,460.00

Music Music Purchases Printing Recording Expenses

1,468.00 325.00 1,793.00

1,468.00 325.00 1,793.00

Musicians Workshops Annual Dues, Licences and Membership Licences (SOCAN) Orchestra Canada London Arts Council

285.00 93.00 50.00 428.00 47,757.00 -

285.00 93.00 50.00 428.00 500.00 45,587.00 (7,187.00)

Accountant Total Expenses Net Income/(Loss)

As of the end of 2005, current assets of LYS will be $67,546, meaning, that by increasing the number of enrollees to at least 70 at $240 tuition fee, LYS could now afford an operating deficiency in 2005 and can now maintain a bank account higher than the balance of $30,000 and break even in 2006.

ACA 2. Assimilate with the FC and with School Bands/Orchestra In the case of London Youth Symphony, the entity is facing an uncertain future as it admits that its funds can only cover its expenses for only a year or so. As such, revenue would have to be made through a reform of its current practices. This reform may come in the form of assimilating FC and school bands/orchestras. The concept of assimilation has been defined as the integration of a smaller entity to a bigger counterpart. The assimilation by LYS of smaller entities would lead to benefits and disadvantages that would be elaborated in the following points. 1. Re: Teachers During recent years, LYS maintains that it has been steadily losing teachers to Forest City. The high attrition rates could be attributed to inadequate compensation. This problem is made worse by the fact that during the previous years, the teachers have been the ones recruiting new students. As such, a decrease in the number of teachers would lead to a decrease in enrollment of students, which would have dire consequences. As it is, the decrease in teachers is detrimental to the survival of LYS. As such, assimilation with the entity hiring the teachers would help solve the problem of losing the muchneeded manpower. 2. Re: Importance of String players As it is, LYS relies on YS for a steady supply of string musicians. However, history dictates that YS has never been able to sufficiently produce enough string players, with (2) to (3) players each year being the average carry over. Likewise, in the symphony orchestra the string section is essential, as it requires the most number of capable musicians in order for the orchestra to fully function. Thus, LYS assimilation with its counterparts would solve the deficiency in numbers. 3. Re: Increase in student enrollment An obvious effect of assimilation would be an increase in student enrollment. This single aspect would have a wide range of implications that would affect the balance sheet. Facts suggest, that there is a utilizable population of 100+ music students studying within Forest City. The assimilation with the said city and its high schools would have the potential of bringing these students into the fold of LYS. This would therefore increase realizable profit of LYS. 4. Re: International Youth Orchestras The major benefit of an FC student joining the LYS program is that they would be able to experience the full orchestral pieces (beyond just strings) under the baton of a professional

conductor. Hence, they would have the privilege to participate in an international youth orchestra. 5. Re: Disadvantages of Assimilation Assimilation, brings about the merging of two cultures. The first would be an orchestral approach that is espoused by LYS and the second would be a soloist approach pioneered by FC In this interplay of clashing ideals there are bound to be disputes. However, there are also gains to be realized. Advantages Holistic Approach Disadvantages Increase of Employee expenses

Possibility of Attracting students from FC & Possibility of tuition fee hike in order to School Bands adequately compensate additional staff Increase Revenue (In the form of new Decrease in existing LYS students who enrollees) cannot afford such hikes conditions Loss of autonomy by being sucked into the school system

Analysis Applying the foregoing, there are clear advantages. The main thrust in this endeavor is the ability of a student to compete in an international level. Moreover, the increase of enrollees would redound to the benefit of LYS and help unburden its financial woes. However, the main drawback is that LYS would lose its identity or autonomy as it will get sucked into the schools it assimilates with. As such, there is a need to review other alternatives in order to prevent loss of identity.

ACA 3. Rebranding London Youth Symphony To increase LYS, a rebranding of the program can be made. The rebranding of the program would involve changes that would provide a positive effect on the programs revenue. This ACA is different from the second ACA because there will be no assimilation that will happen and will only involve changes within the company. These changes are: 1. Renting Aeolian Hall

LYS rents Wortley Baptist Church for its rehearsals and spends $2,850.00 every year unlike London Community Orchestra that rents Aeolian Hall for $2,400.00/annually. If LYS decides to rent Aeolian Hall, it will be able to save $450.00 every year. Although Aeolian Hall needs some minor repairs, its facilities are still capable in meeting the needs of the LYS. In addition, the hall may also be used as a performance venue saving LYS the burden of looking for concert venues and additional costs. Lastly, if LYS would hold its concerts in Aeolian Hall, it would open the opportunity for LYS to have a concession booth during its concerts which would bring additional revenue amounting to at least $150.00. In terms of scheduling which day LYS can rehearse, the venue is free every Saturday afternoons which is beneficial for the musicians being that most of them are students. This will also attract other musicians to join the program because it would not conflict with their other priorities. In addition, they can also schedule its concerts every Sundays, which Wortley Baptist Church cannot offer provided that it will not conflict the scheduled concerts of London Community Orchestra. 2. Hiring Daina Janitis as Manager The board unanimously agrees that a Manager is needed to properly address LYS needs and expressed its support to have Janitis appointed as Manager. By appointing Janitis, LYS would be able to $4,000 which they would have to pay if they hired a different manager. If Janitis will be hired, she will be able to focus on sending solicitation letters addressed to the corporation which is one of the responsibilities that she has to do as Manager. 3. Persuading corporations to sponsor LYS The case acknowledges that corporation sponsors plays a big part when it comes to increasing LYS revenues thus having a paid manager would mean having someone who will focus on attracting corporations to sponsor the programs. To entice the corporations to sponsor, in return LYS can provide constant public recognition for the sponsors which will also be a mode of advertisement to them. 4. Hiring an accountant Although LYS would have to pay an accountant $500 to audit its statements, this would be offset by the $12,750 grant given by London Arts Council. It was stated in the case that LAC is willing to provide $12,750 grant if LYS would hire an accountant. In the end, the action would bring revenue amounting to $11,500. 5. Providing different tuition fee payments Assuming that LYS collects payments on annual basis only, this results to some students not being able to afford the one time payment of the program. To encourage the students to pay

the tuition fee, LYS can provide alternative time payments that would fit bests to the students capability of paying. This action would result in an increase in revenues. . INCOME STATEMENTS (for years ending August 31 2005) 2005 REVENUES Tuition Fees London Youth Symphony Young Strings 2004

13,000.00 6,714.00 19,714.00

10,355.00 6,714.00 17,069.00

GRANTS, SPONSORHIP AND DONATIONS Trillium Foundation London Arts Council Grant Corporate Sponsors LYS Musician Family Donations

0 12,750.00 5,000.00 300 18,050.00

7,000.00 5,000.00 300.00 12,300.00

FUNDRAISING Bingo Revenue Other Fundraiser

7,447.20 800.00 8,247.20

9,309.00 800.00 10,109.00

PERFORMANCE PROCEEDS LYS Concert Ticket Sales LYS Paid Performance YS Door Donations

2,160.00 2,600.00 220.00 4,980.00 17 51,008.20 2005

3,726.00 2,600.00 220.00 6,546.00 17 $46, 041.00 2004

INTEREST TOTAL REVENUES

EXPENSES Honoraria LYS Musical Directors Manager YS Conductor LYS Sectional Coaches LYS Music Librarian Program Designer

12,523.00 6,000.00 4,500.00 1,550.00 1,000.00 25,573.00

12,523.00 4,500.00 1,550.00 1,000.00 19,573.00

Performance Expenses Hall & Equipment Rental Hired Musicians

2,400.00 -

2,850.00 875.00

Out-of-Town Facility Finders Fee Souvenirs Programs Photography and Flowers Dress Rehearsals Pizza Supper LYS Reception Posters and Tickets

400.00 325.00 1,389.00 703.00 201.00 191.00 5,609.00

400.00 325.00 1,389.00 703.00 666.00 201.00 191.00 7,600.00

Instruments English Horn Instrument Damage Clarinet Timpani Mallets Bow for Double Bass

0.00

648.00 180.00 92.00 920.00

Fundraising Expenses Bingo Hall Rental and Expenses Bingo Licence Fee Other Fundraising Expenses

2,872.00 900.00 218.00 3,990.00

2,872.00 300.00 218.00 3,390.00

Uniform Expenses LYS YS

1,200.00 1,200.00 2,931.38

2,378.00 1,226.00 3,604.00 2,846.00

Insurance General and Administrative Expenses Telephone Website Advertising Photocopying Office Supplies Postage Post Office Box Rental Software Bank Charges and Cheques

(20.00) 200.00 167.00 473.00 465.00 175.00 50.00 1,510.00

1,209.00 1,000.00 740.00 167.00 473.00 465.00 175.00 99.00 50.00 4,378.00

Music Music Purchases Printing Recording Expenses

1,468.00 325.00 1,793.00

1,468.00 325.00 1,793.00

Musicians Workshops Annual Dues, Licences and Membership Licences (SOCAN) Orchestra Canada London Arts Council

285.00 93.00 50.00 428.00 500.00 43,534.38 7,473.82

285.00 93.00 50.00 428.00 44,532.00 (1,509.00)

Accountant Total Expenses Net Income/(Loss)

Although this ACA would satisfy one of the objectives which is to increase LYS revenue, it would be impossible to conduct a break even hence, not fulfilling all of the objectives. Therefore, this ACA is not the best fit for the case. VII. Conclusion Basing from the quantitative analysis of the given data, the application of the first ACA can sufficiently meet the objectives of increasing LYS enrollment rates of at least 40 enrollees; providing LYS all its necessities in terms of labor force and equipment; and, maintaining a minimum bank account balance of $30,000 and break even in 2006. In computing for the maintained minimum bank account balance of $30,000.00, the existing bank account of 2004 in the amount of $43,173.00 was subtracted with the financial losses in 2005 for $7,187.00, hence, the remaining balance in LYS bank account for year -end 2005 is 35,986.00. In the year 2006, the projected revenue was expected to be in the amount of 47,757.00 and the projected total expenses were also expected to be in the same amount. Hence, there will be no profit or gain for LYS at year-end 2006, such situation being the break-even point. VIII. Recommendation The best alternative course of action would be Alternative Course of Action number 1. This particular action would solve the problem of LYS and meet their objectives. Offering a full scholarship in 2005 would encourage the students to enroll in the program, however, LYS would experience loss in its revenue. For break even to take place, LYS would have to let its students pay $240 for LYS enrollees and $145 for YS enrollees.