Prepare a flexible budget performance report for the year. Based on this flexibl
ID: 2471303 • Letter: P
Question
Prepare a flexible budget performance report for the year.
Based on this flexible budget performance report, what is the primary cause of the loss in net income?
Did management do a good job in controlling expenses?
Based on your analysis and your flexible budget, were management's decisions regarding competitiveness sound or not?
GREEN PASTURES Static Budget Income Statement For the Year Ended December 31,2017 Actual Master Budget 60 21,900 Difference Number of mares Number of boarding days Sales Less: Variable expenses 52 19,000 $380,000 8 U 2,900 U $547,500 $167,500 U 104,390 58,838 4,984 10,178 178,390 201,610 109,500 65,700 5,475 12,045 192,720 354,780 5,110 F 6,862 F 491 F 1.867F 14.330 F 53,170U eec Veterinary fees Blacksmith fees Supplies Total variable expenses Contribution margin Less: Fixed expenses Depreciation Insurance Utilities Repairs and maintenance Labor Advertisement Entertainment 40,000 11 ,000 12,000 10,000 88,000 12,000 7,000 180,000 S 21.610 2.000 F 1,000F 7,000 F 4,000 U 2,000 U 4,000 F $170,780 $149,170 U 40,000 11,000 14,000 11.000 95,000 8,000 5,000 184,000 Total fixed expenses Net incomeExplanation / Answer
Flexible Budget Report For the year ended December 31,2017 Working Actual Master Budget Flexible budget Variance Standard cost as per master budget SC No. of mares M 52 60 52 No.of boarding days B 19000 21900 19000 $25 S/B Sales S $380,000 $547,500 $475,000 $95,000 U Less: Variable Expenses B*SC Feed F 104390 109500 95000 9390 U 5 F/M Veterinary Fees V 58838 65700 57000 1838 U 3 V/m Blacksmith fees L 4984 5475 4750 234 U 0.25 L/M Supplies S 10178 12045 10450 272 F 0.55 S/M Total variable expenses 178390 192720 167200 11190 U 8.8 Contribution Margin $201,610 $354,780 $307,800 $106,190 U Fixed Expenses Depreciation 40000 40000 40000 0 Insurance 11000 11000 11000 0 Utilities 12000 14000 14000 2000 F Repairs & Maintanenec 10000 11000 11000 1000 F Labor 88000 95000 95000 7000 F Advertisement 12000 8000 8000 4000 U Entertainment 7000 5000 5000 2000 U Total Fixed Expenses 180000 184000 184000 4000 F Net Income $21,610 $170,780 $123,800 $102,190 U The primary cause of loss in net income is due revenue the standard revenue per day is $25 but the actual revenue per day is $20 which decreases the net income by $95000(19000*(20-25)) and the feed expenses is in actual 104390 against $95000 Yes management dint do a good job in controlling expenses as except feed expenses, advertisment and entertainment as it is more than budgeted, the other unfavorable variance of veterinary fees,supplies are not mush deviated. No, it was not sound as the revenue estimated was almost 25% higher than the actual revenue which shows it dint set competitive prices.