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Salaries.
Salaries actual cost for y/e 31st may 20×3 is $620,000.
Inflation adjustment is +2%
Budgeted cost for y/e 31st may year 2Note. One teacher earning a salary of $26000 left the school on 31st may 20×3 and there are no plans to replace her. However, a 2% pay rise will be given to all staff with the effect from 1 December.
Could you explain how to recalculate for the note.
The actual costs for the year to 31 May 2013 was $620,000. One teacher left on 31 May 2013, so ignoring inflation, this would leave a cost of 620,000 – 26,000 = 594,000.
Salaries will be increased by 2% on 1 December 2013, so for the year to 31 May 2014, half a year (1 June to 30 November) will be paid at the current rate and so will be 1/2 x 594,000 = 297,000.
The second half year (1 December to 31 May) will be 2% higher, so 297,000 x 1.02 = 302,940.So the total to budget = 297,000 + 302,940 = $599,940.
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