Assignment Papers-Develop an  examination of the financial statements

Assignment Papers-Develop an  examination of the financial statements

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.

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 an  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?