Bill Jenkins runs \"Dog Lovers Lt " a dog boarding kennels, mainly aimed at holiday makers leaving their dogs when they go away. The kennels has a capacity for 40 dogs per day. The normal rates are 22 per day for large dogs and 18 per day for small dogs. Each dog is checked on arrival to ensure that there is nothing which could be passed on to other dogs. The checks are done by a vet which costs 20 per dog per visit and a groomer charging 15 per dog per visit. These checks are essential and are paid for by \"Dog Lovers Ltd". If a dog requires further visits from the vet, the customer is charged at a rate of 150% of the vet's fees. For budget preparation purposes, the average stay is 10 days, although in practice the number of days may be different. To create this budget, the mix of dogs is assumed to be 50% large and 50% small. Feed costs 1.00 per day per dog irrespective of the size 01 the dog. Bill Jenkins is not an accountant but has tried to prepare a master budget for the nancial quarter to 31.12.20 based on the information above. The budget, the actual performance and the variances he has prepared are shown below: Dog Lovers Performance Report for 3 months [91days} ended 31.12.2020 Budget Standard Master Actual Variance" {per Dog per Budget Net income Dav] Number of dogs boarded E @ Number of boarding days 3640 3500 100M? Revenues g g g g Boarding Fees 20.00 ?2,800 71,240 1 50004} Additional vet fees g E 450] F1 Total revenues 22,800 71,690 1,1101A] Less variable expenses Feed 8 supplies 1.00 3,040 3,800 22005.] Veterinary fees 2.00 7,280 11,300 4,020 (A) Grooming lees 1.50 5,400 8,250 2 T80 (A) Total variable expenses E 10 380 23 410 T 036m: Contribution margin 15.50 50,420 48,2?4 8,1461A] Less xed expenses Depreciation 8 insurance 0,000 0,000 0 Rates, light and heat 3,000 3,200 200 (A) Repairs maintenance 1,000 400 000 {F} Labour 18 000 18 800 800 {A} Total xed expenses 28 000 28 400 4001A} Net income 213,420 19,3?4 8,5401A] "F = Favourable A = Adverse Bill Jenkins is concerned about the much lower prot for the quarter compared to the budget. Except for favourable variances on xed expenses for repairs and maintenance and the money for additional vet charges everyiing is unfavourable. The supplier ot Feed and Supplies warned Bill that these costs would increase by 10% (based on the gures used in the budget), so the kennels have attempted to take care not to waste food. Kennel fees charges and veterinary and grooming rates have stayed the same during the period. Required: a] Explain the purpose of standard costs and revenues using a variable {marginal} cost system. b] Bill Jenkins may not have used the correct approach to his performance report. Using any calculations you consider appropriate, provide a revised nancial report, including all possible variances. In particular provide a sales mix variance broken down by number of small and large dogs and planning and operating variance for feed and supplies. c] Wte a brief report to Bill Jenkins on the nancial pertonnance of the kennels for the quarter giving advice for the future
