Managerial Analysis
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.
The assigment will be graded based upon Content (80%) and Organization and Structure (20%)
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?
Show your work in Microsoft® Word or Excel®.
Complete calculations/computations using Microsoft® Word or Excel®.
Format the assignment consistent with APA guidelines. Please ensure that you use a business memo format for this assignment.
Resources: You must include 3 external resources to support your assignment.
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Green Pastures Static Budget Income Statement ACC/561 Version 7
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University of Phoenix Material
Green Pastures
Static Budget Income Statement
For the Year Ended December 31, 2017
Actual Master Budget Difference
Number of Mares 52 60 8 U
Number of Boarding Days 19,000 21,900 2,900 U
Sales $380,000 $547,500 $167,500 U
Less: Variable Expenses
Feed 104,390 109,500 5,110 F
Veterinary Fees 58,838 65,700 6,862 F
Blacksmith Fees 4,984 5,475 491 F
Supplies 10,178 12,045 1,867 F
Total Variable Expenses 178,390 192,720 14,330 F
Contribution Margin 201,610 354,780 153,170 U
Less: Fixed Expenses
Depreciation 40,000 40,000 -0-
Insurance 11,000 11,000 -0-
Utilities 12,000 14,000 2,000 F
Repairs and Maintenance 10,000 11,000 1,000 F
Labor 88,000 95,000 7,000 F
Advertisement 12,000 8,000 4,000 U
Entertainment 7,000 5,000 2,000 U
Total Fixed Expenses 180,000 184,000 4,000 F
Net Income $21,610 $170,780 $149,170 U
