Z-Bar Pastures is a 160-hectare farm on the outskirts of Swift Current, Saskatchewan, specializing in the boarding
Question:
The budget report for 2012 is presented below. 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 as follows: feed $5; veterinary fees $3; blacksmith fees $0.30; and supplies $0.70. All other expenses were either semi-fixed 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 entertained clients more.
Instructions
(a) Based on the static budget report, answer the following questions:
1. What was (were) the primary cause(s) of the loss in net income?
2. Did management do a good, average, or poor job of controlling expenses?
3. Were management's decisions to stay competitive sound?
(b) Prepare a flexible budget report for the year.
(c) Based on the flexible budget report, answer the three questions in part (a) above.
(d) What course of action do you recommend for the management of Z-Bar Pastures?
(Data for this case are based on Hans Sprohge and John Talbott, "New Applications for Variance
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Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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