1. BYP10-1 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 blacks

The Company has experienced a pattern of business whereby revenue for its third and fourth fiscal quarters reflects an increase over first- and second-quarter revenue. The Company attributes this increase to clients increased spending at the end of their calendar year budgetary periods and the culmination of its annual sales plan. Since the Companys costs do not increase proportionately with the third- and fourth-quarters increase in revenue, the higher revenue in these quarters results in greater profit margins and income. Fourth-quarter profitability is traditionally affected by significant new hirings, training, and education expenditures for the succeeding year. Instructions (a) Why dont the companys costs increase proportionately as the revenues increase in the third and fourth quarters? (b) What type of budgeting seems appropriate for the Computer Associates situation?

2. BYP10-4 There are many useful resources regarding budgeting available on websites. The following activity investigates the results of a comprehensive budgeting study.

a) What are cited as the two most common pain points of budgeting?

(b) What percentageofcompaniesthatparticipatedinthesurveysaidthattheyprepareannualbudgets? Of those that prepare budgets, what percentage say that they start the budgeting process by first generating sales projections?

(c) What is the most common amount of time for the annual budgeting process?

(d) When evaluating variances from budgeted amounts, what was the most commonly defined range of acceptable tolerance levels?

(e) The study defines three types of consequences for varying from budgeted amounts. How does it describe severe consequences?