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?

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.

 

 

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

 

 

 

 

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