A budget plan allocates $1,200 monthly for entertainment. The university increases the budget by 10% in the first year and 5% in the second year (applied annually to the previous total). What is the entertainment budget in the third year? - Redraw
Budgeting for Entertainment: How a University’s Monthly Entertainment Fund Grows Over Three Years
Budgeting for Entertainment: How a University’s Monthly Entertainment Fund Grows Over Three Years
Managing finances effectively is crucial for universities aiming to provide students with engaging extracurricular activities without overspending. A well-considered entertainment budget plays a key role in boosting campus life, promoting student well-being, and supporting a vibrant academic community. One effective strategy is allocating a fixed amount—such as $1,200 per month—for entertainment, allowing institutions to plan expenses predictably. But how does this budget grow when adjusted annually? Let’s explore how a $1,200 monthly entertainment plan evolves over three years with gradual increases.
Starting Point: $1,200 Monthly Entertainment Budget
Understanding the Context
At the beginning, the university allocates $1,200 each month for entertainment-related expenses—covering events, workshops, movies, gaming sessions, and social activities. This $1,200 translates to an annual budget of:
$1,200 × 12 = $14,400 per year
This consistent baseline ensures steady access to campus entertainment options, fostering a lively student experience from day one.
Year 1: A 10% Increase in Annual Budget
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Key Insights
In the first year, the university enhances student engagement by raising the annual entertainment budget by 10%. This 10% increase is applied to the original $14,400:
$14,400 × 1.10 = $15,840 annual budget for Year 1
Breaking this down monthly, the average monthly budget becomes:
$15,840 ÷ 12 = $1,320 per month
A $1,320 monthly budget reflects a meaningful boost, enabling more frequent or higher-quality events without straining resources.
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Year 2: A Further 5% Increase in Annual Budget
The second year continues the upward trend with an additional 5% increase applied to the new Year 1 total ($15,840). This 5% growth further strengthens the budget:
$15,840 × 1.05 = $16,632 annual budget for Year 2
Computing the monthly allocation yields:
$16,632 ÷ 12 ≈ $1,386 per month
This elevated monthly figure supports expanded programming and enhanced experiences for students across campus.
Projecting the Budget for Year 3: 5% Growth Applied to Year 2 Total
Looking ahead to Year 3, the university applies another 5% increase—this time to the Year 2 annual total of $16,632:
$16,632 × 1.05 = $17,463.60 annual budget for Year 3
Dividing this annual amount by 12 gives the projected monthly entertainment budget:
