The budget report for 2022 follows. 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

Green Pastures
				Static Budget Income Statement
				For the Year Ended 12/31/2022
Actual	Master								Difference				Favorable or Unfavorable
Number of Mares		52				60				8					U
Number of Boarding Days		19000				21900				2900					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				$ -
Insurance			$ 11,000				$ 11,000				$ -
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

1. Based on the static budget report:
2. What was the primary cause(s) of the decline in net income?
3. Did management do a good, average, or poor job of controlling expenses?
4. Were management’s decisions to stay competitive sound?
5. Prepare a flexible budget report for the year.
6. Based on the flexible budget report, answer the three questions in part (a) above.
7. What course of action do you recommend for the management of Green Pastures?

Answer rating: 100% (QA)

Green Pastures For the Year Ended December 31 2022 Flexible Budget Actual Flexible Budget Flexible B... View the full answer