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
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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?
Show your work in Microsoft® Word or Excel®.
Complete calculations/computations using Microsoft® Word or Excel®.
Format the assignment consistent with APA guidelines.
Click the Assignment Files tab to submit your assignment.
Explanation & Answer
Hello,the attachments below are the answres.Thank you
Running Head: Managerial Analysis
1
MANAGERIAL ANALYSIS
STUDENT’S NAME:
COURSE TITLE:
UNIVERSITY AFFILIATION:
DATE:
Managerial Analysis
2
Answer 1:
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.
Answer 2:
The management did poor in controlling the variable expenses and good in
controlling the fixed expenses. The above cal...
