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?

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

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?

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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Final Thoughts

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: