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Answer Homework Assignment Questions #1, #2, #3, #4 and #5 at the end of Chapter 6 of The Basics of Pubic Budgeting & Financial Management.

Chapter 6 Homework Exercises
Directions: Complete question 1 & 2 in a word processing program and questions 3-7 in Excel. Do not round any numbers until the final step. You can complete the remaining questions in Excel
and paste the answers into a word processing program. Please turn in your Excel worksheets and the MS Word file with the pasted Excel worksheets to your professor.
1. The mayor for Jefferson City has requested a cost-benefit analysis. In short, she wants to know if the city can save money by using outside security vendors for public events held at the city’s
convention center. The city manager has appointed you, budget analyst, to conduct the analysis. Your analysis should provide three alternatives. The first one should provide the data for the cities’
police department and the latter two should be estimates from two private companies (Security One and First Line Security). Since private companies are considered in this example, the budget
should be primarily limited to personnel and operating costs. Below is a list of information that you should use when conducting your analysis. When you complete your analysis, make a
recommendation to Mayor McClain. You are free to write your analysis in any form that you choose as long as you consider the information that is provided below. Last, in addition to what the
city spent, you must create a budget for the remaining vendors.
The city spent $740,000.00 in salary and benefits last year (police department) in providing security at the convention center for 35 events.
The events averaged 25,000 people.
A total of thirty five officers were used, on average, for each event last year.
The convention center has a main security office that requires three persons to be on duty at all times.
There are 8 points of entry that require an armed security guard.
The events averaged five hours in length.
Security One has contracted with the city in the past (four years) with fairly good evaluation scores on customer service. They have 40 security officers who are trained in CPR and
paramedic skills, with an average tenure of 6 years. Thirty five of the officers are registered to carry weapons. They have four staff members with at least one person on duty at all
times. The main office is not in the downtown area.
First Line Security is a new company that was started by the previous police chief. They have 50 security officers with an average tenure of 10 years of experience and five staff
members. They also have an office downtown near the areas where events tend to occur (open 24 hours per day). They have managed two large events thus far with few problems.
They received high evaluation scores on both events. In addition, their fees tend to be slightly less than the competition for the same services.
Items to consider in the “Benefits” section of your analysis could include: educational levels of security officers, certifications (diversity training, CPR, etc), length of experience, permits
(handgun, etc), age; age of company, clientele list, work history of company, number and type of security vehicles, and expected length of the security contract. Also, note that the contractors are
completely responsible and liable for their employees and any incidents that may occur (i.e. employee insurance; contractor must be bonded, etc). In addition to the above items, you should
consider speaking with a security or police office to see what additional items should be included in your proposal. It is not necessary to include every possible detail in your cost, but try to be
holistic in your categories so as to keep your budget succinct.
2. As a result of the population growth at the north end of Jefferson City over the last five years (5,000 people and 2,000 new homes), Mayor McClain has asked you to create a cost effectiveness
analysis plan (CEA) to manage the provision of postal services to residents in that area. In short, the residents want a new post office in their neighborhood. However, the mayor is not completely
sold on the idea, but she has to make a recommendation to the Post Master General. Hence, she wants you to examine the proposals so that she can provide the council with multiple options to
consider, including building a new post office at the north end of town. When you are finished considering the three options, make a recommendation to the mayor along with a narrative
explaining the recommendation. That is, which option should produce good results with the least amount of spending? Your options should include at least three variables (cost, users, space,
vehicles needed, equipment, etc.). In addition, include at least four important questions (budget, traffic patterns, location, etc.) that could impact the council’s decision.
3. Jefferson City has decided to build a downtown parking garage to house city employee’s vehicles. Since the city has to demolish several buildings on the site, the project will take five years to
complete. The city expects to save $30,000.00 a year once the project is completed. Using a 5% discount rate, determine the present value (PV) of the $30,000.00 savings at the end of the five
year period.
4. The Jefferson City Council is contemplating selling a building that is currently leased to Dr. Tarria Whitley, a local veterinarian, for $95,000.00. Whitley leases the building for $900.00 per
month and is currently on a six year annually renewed lease with the option to buy the property at the close of the lease for $45,000.00. Using the present value formula and a 6% discount rate,
calculate the total benefit of the leasing option and compare it with the option to sell the property.
5A. Chief Candace Miller of the Jefferson City police department has submitted a proposal to the city’s budget director requesting the purchase of ten new police cars. She estimates the
department will save $20,000.00 a year by having the new cars. The cars will cost the city $200,000.00. Unfortunately, the life span of a police car is only four years at best. Using a 7% discount
rate, calculate the net present value of the proposal. Explain the results.
B. Using the above example, calculate the NPV using the following data: Discount Rate = 5%, Cost of Cars = $185,000.00, Annual Savings = $90,000.00, Life span of car = 5 years. Explain the

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