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Running Head: Managerial Analysis
The primary cause of loss in net income was that the number of boarding days has
decreased in the actual as compared to master budget. Drury, C. (1994) suggested that a
master budget aggregates all the lower level budgets of various functional areas of a
company. The master budget was prepared assuming that there will be 21,900 boarding
days whereas the number of boarding days was 19,000 only. Due to low number of actual
boarding days the performance the number of boarding days declined by 2,900 days. The
exact number of boarding days reduced by 13.24% ((21,900 – 19,000) / 21,900).
The actual boarding fees also decreased significantly as compared to budgeted
boarding fees. The budgeted boarding fee was $25 per boarding day ($547,500 / 21,900)
which decreased to $20 per boarding day ($380,000 / $19,000). Thus, the per day
boarding fee decreased by $5 or 20% (($25 - $20) / $25) which was the other main cause
of loss in net income of Green Pastures.
The management did poor in controlling the variable expenses and good in
controlling the fixed expenses. The above cal...
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