What was the primary cause(s) of the loss in net income

What was the primary cause(s) of the loss in net income

What was the primary cause(s) of the loss in net income

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?

Solution preview

The losses that came about in the net income were as a result of a reduction in the number that had been designated for boarding days that were depicted in the master budget in comparison to the actual budget. Master budgets often comprise various budgets that pertain to the lower level in a given company (Lawson et al., 2015)……………………..

APA
827 words

 

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