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.

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