Managerial Analysis- Assessment

Anonymous
timer Asked: Mar 27th, 2017
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Question Description

Purpose of Assignment

This comprehensive case requires students to evaluate a static budget and prepare flexible budgets to meet managerial needs. Students are required to calculate and analyze variances and discuss how variances are critical to managerial decision making.

Assignment Steps

Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC), Green Pastures Static Budget Income Statement

Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

Scenario: Green Pastures is a 400-acre farm on the outskirts of the Kentucky Bluegrass, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry has led to a decline in breeding activities, and it has made the boarding business extremely competitive. To meet the competition, Green Pastures planned in 2017 to entertain clients, advertise more extensively, and absorb expenses formerly paid by clients such as veterinary and blacksmith fees.

The budget report for 2017 is presented as an attachment. As shown, the static income statement budget for the year is based on an expected 21,900 boarding days at $25 per mare. The variable expenses per mare per day were budgeted: feed $5, veterinary fees $3, blacksmith fees $0.25, and supplies $0.55. All other budgeted expenses were either semifixed or fixed.

During the year, management decided not to replace a worker who quit in March, but it did issue a new advertising brochure and did more entertaining of clients.

Develop a minimum 700-word examination of the financial statements and include the following:

  • Based on the static budget report:
    • What was the primary cause(s) of the loss in net income?
    • Did management do a good, average, or poor job of controlling expenses?
    • Were management's decisions to stay competitive sound?
  • Prepare a flexible budget report for the year.
  • Based on the flexible budget report:
    • What was the primary cause(s) of the loss in net income?
    • Did management do a good, average, or poor job of controlling expenses?
    • Were management's decisions to stay competitive sound?
  • What course of action do you recommend for the management of Green Pastures?

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Tutor Answer

Prof_Baron
School: Boston College

Hi there, kindly go through the attached document and let me know if you've got any queries

Running Head: Managerial Analysis

1

Managerial Analysis
Names:
Institution:

Managerial Analysis

2

Introduction
A static budget is a budget which remains unchanged irrespective of the volume of the sales
made. It is usually prepared at the beginning of the budget period.
Thus, based on the static budget against the actual budget provided for Green pastures the loss in
the net income was brought about by the following;
There was a reduction in the revenue attributed to per mare per day because as per the actual
budget the attributable revenue per Mare per day was supposed to be $ 25, but as per the real
budget, the income declined to $ 20. Ultimately all this translated to an unfavorable variance for
the firm.
Average revenue per mare per day = 𝑹𝒆𝒗𝒆𝒏𝒖𝒆⁄𝑵𝒖𝒎𝒃𝒆𝒓𝒔 𝒐𝒇 𝒃𝒐𝒂𝒓𝒅𝒊𝒏𝒈 𝒅𝒂𝒚𝒔
Actual = 379,600⁄18,980 = $ 20
Static/ Master budget = 547,500⁄21900 = $ 25
Despite decline in the revenue attr...

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Review

Anonymous
Excellent job

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