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Gotham Meals on Wheels
Young, David W.
Functional Area(s):
   Finance/Financial Management
   Financial Accounting
Difficulty Level: Beginner
Pages: 2
Teaching Note: Available. 
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First Page and the Assignment Questions:

“We're a success!” exclaimed Ethan McCall, Executive Director of Gotham Meals on Wheels upon seeing that his March surplus had reached $2,000. “And if our projections for the next six months are accurate, we'll have earned enough to rent facilities in Newburytown and double our service area. My only concern is whether we'll have the cash on hand to do so.”

With that, Mr. McCall set about predicting how his cash would change in accordance with his projected growth in volume of activity. Although March had been a good month, cash had been falling since December, and he was concerned about making sure he had enough on hand to purchase supplies and meet payroll for the remainder of the year.


Gotham Meals on Wheels was a nonprofit agency that specialized in preparing and delivering nutritious yet appetizing meals to home-bound people. Its clientele included many elderly people plus individuals with AIDS who, because of the debilitating nature of their disease, were unable to leave their homes, and did not have enough strength to prepare their own meals. Convinced that there was a market for a specialized meal service, and supported by a $25,000 grant from a local foundation, the agency had begun operations in early October.

In order to assure that it wouldn't run short during any given month, the agency prepared its meals one month in advance and froze them. By basing production on the following month's anticipated sales, the agency had found that it could assure its clients of uninterrupted service. All the costs associated with these meals were paid in the month in which production took place.

Another advantage of freezing the meals was that they could be delivered in bulk to each client. The meals were easily stored in the freezing compartments of clients' refrigerators. From the agency's perspective, freezing the meals and delivering several of them at a time had allowed it to keep its transportation costs at a minimum. Clients seemed to have no complaints about the food being frozen, and many, in fact, had written Mr. McCall to tell him how much they enjoyed the meals. . . .


  1. Prepare actual balance sheets, operating statements, and statements of cash flows (SCF) for November through March, and pro forma statements for April through September. Be sure you reconcile Equity, Accounts Receivable, and Inventory for each month, beginning in November, and, for each account, using the basic formula:
    BB + Additions - Reductions = EB*
  2. What problems, if any, does the organization have? Please be as specific as you can, clearly identifying the cause of any problems you identify.
  3. What advice would you give Mr. McCall?
* Set up a spreadsheet containing the balance sheet, the operating statement, and the statement of cash flows in such a way that they are all interconnected. That is, try to make the spreadsheet as “formula driven” as possible, using only the number of meals, the variable cost per meal, the per-meal price, and fixed costs as the “drivers.”