CASE 2: ZEE-TOWN ZOO (30 marks) The director of the Zee-Town Zoo, Paul White, received the Zoo's financial statements for the year ending December 31, 2019 in early March 2020. While the world was quickly becoming a strange place, the previous year hadn't been much better! The financial situation was quite different from what Paul had expected, and, he wondered if the strange weather patterns were responsible for large variances in the budget. These variances are summarized in Table 1. The winter had been the gloomiest on record, while the spring and summer had been unusually warm and balmy. Winter storms caused the zoo to close for more days than planned, but the spring weather produced an unexpected success in the animal-breeding program. Because Zee-Town was facing a tough economic environment, the zoo had received more government aid than expected, largely in the form of grants. Nonetheless, Paul was concerned that the emerging global situation would force the city to reconsider many of its popular recreation activities as local aid was slashed in favour of healthcare spending. The Mayor had just called an emergency meeting to discuss the financial situation. Paul was asked to give a detailed presentation on the zoo's financial health and to present a preliminary budget for the next financial year. He needs your help! Required: a) Prepare a revenue and expense variance analysis for Paul using the information provided in Table 1. If you feel any assumptions need to be made regarding the nature of costs, clearly state them in your response. For each variance you calculate, clearly state whether it is favourable or unfavourable. (8 marks) b) Using the information provided in Table 1 and your calculations from part a, which variances would you recommend that Paul investigates? What do you predict the probable causes of these variances are? Describe detailed actions you could take to confirm the accuracy of your predictions. (6 marks) c) Using the additional operating data in Table 2, compute quantity and price variances for two revenue categories. What can Paul conclude about the zoo's operations from this analysis? Remember to clearly state whether each variance is favourable or unfavourable and to show your work. (5 marks) d) Using the additional operating data in Table 2, compute quantity and price variances for two expenditure categories. What can Paul conclude about the zoo's operations from this analysis? Remember to clearly state whether each variance is favourable or unfavourable and to show your work. (5 marks) e) As you're meeting with Paul to review the results of your analyses, he receives a call from the Mayor indicating that the Zoo will receive $100,000 less in subsidies next year. What are two actions Paul could take to close the budget shortfall? If you suggest alternatives that more information is required for, state what that information is and how you would obtain it. (6 marks) Table 1: Revenues: ACTUAL BUDGETED Gate Ticket Revenue from visitors License Revenue from the food court Donations from individuals Grants for the Tiger Conservation Project* Grants for the Rhino Conservation Project* Grants for the Cuckoo Conseration Project Subsidies from the Provincial Government 120,000 120,000 60,000 216,000 120,000 144,000 240,000 144,000 120,000 120,000 180,000 120,000 120,000 180,000 Total Revenues 1,020,000 984,000 Expenditures: Salary of Zoo Director Salaries for Assistant Zoo Keepers (2 total) Wages and Salary for Animal Handlers Security, Office, and Support staff Wages Fringe Benefits cost for employees (health, insurance, etc) Food and Provision costs for animals Overtime costs Utilities Transportation and facilities for visitors 96,000 120,000 120,000 60,000 156,000 432,000 120,000 60,000 120,000 96,000 120,000 120,000 60,000 156,000 288,000 48,000 36,000 60,000 1,284,000 984,000 Total Expenditures * Funds received directly from the Federal Government Table 2: ACTUAL BUDGETED $ $ $ $ Number of Visitors Price per Admission Ticket Number of donations Value of each donation Number of animals in the Zoo Food Consumed/animal/year Overtime costs per day Number of Zoo open days 12,000 12.00 1,200 60.00 144 3,600 520.80 276 18,000 9.60 600 240.00 120 2,880 144.00 300 $ $ CASE 2: ZEE-TOWN ZOO (30 marks) The director of the Zee-Town Zoo, Paul White, received the Zoo's financial statements for the year ending December 31, 2019 in early March 2020. While the world was quickly becoming a strange place, the previous year hadn't been much better! The financial situation was quite different from what Paul had expected, and, he wondered if the strange weather patterns were responsible for large variances in the budget. These variances are summarized in Table 1. The winter had been the gloomiest on record, while the spring and summer had been unusually warm and balmy. Winter storms caused the zoo to close for more days than planned, but the spring weather produced an unexpected success in the animal-breeding program. Because Zee-Town was facing a tough economic environment, the zoo had received more government aid than expected, largely in the form of grants. Nonetheless, Paul was concerned that the emerging global situation would force the city to reconsider many of its popular recreation activities as local aid was slashed in favour of healthcare spending. The Mayor had just called an emergency meeting to discuss the financial situation. Paul was asked to give a detailed presentation on the zoo's financial health and to present a preliminary budget for the next financial year. He needs your help! Required: a) Prepare a revenue and expense variance analysis for Paul using the information provided in Table 1. If you feel any assumptions need to be made regarding the nature of costs, clearly state them in your response. For each variance you calculate, clearly state whether it is favourable or unfavourable. (8 marks) b) Using the information provided in Table 1 and your calculations from part a, which variances would you recommend that Paul investigates? What do you predict the probable causes of these variances are? Describe detailed actions you could take to confirm the accuracy of your predictions. (6 marks) c) Using the additional operating data in Table 2, compute quantity and price variances for two revenue categories. What can Paul conclude about the zoo's operations from this analysis? Remember to clearly state whether each variance is favourable or unfavourable and to show your work. (5 marks) d) Using the additional operating data in Table 2, compute quantity and price variances for two expenditure categories. What can Paul conclude about the zoo's operations from this analysis? Remember to clearly state whether each variance is favourable or unfavourable and to show your work. (5 marks) e) As you're meeting with Paul to review the results of your analyses, he receives a call from the Mayor indicating that the Zoo will receive $100,000 less in subsidies next year. What are two actions Paul could take to close the budget shortfall? If you suggest alternatives that more information is required for, state what that information is and how you would obtain it. (6 marks) Table 1: Revenues: ACTUAL BUDGETED Gate Ticket Revenue from visitors License Revenue from the food court Donations from individuals Grants for the Tiger Conservation Project* Grants for the Rhino Conservation Project* Grants for the Cuckoo Conseration Project Subsidies from the Provincial Government 120,000 120,000 60,000 216,000 120,000 144,000 240,000 144,000 120,000 120,000 180,000 120,000 120,000 180,000 Total Revenues 1,020,000 984,000 Expenditures: Salary of Zoo Director Salaries for Assistant Zoo Keepers (2 total) Wages and Salary for Animal Handlers Security, Office, and Support staff Wages Fringe Benefits cost for employees (health, insurance, etc) Food and Provision costs for animals Overtime costs Utilities Transportation and facilities for visitors 96,000 120,000 120,000 60,000 156,000 432,000 120,000 60,000 120,000 96,000 120,000 120,000 60,000 156,000 288,000 48,000 36,000 60,000 1,284,000 984,000 Total Expenditures * Funds received directly from the Federal Government Table 2: ACTUAL BUDGETED $ $ $ $ Number of Visitors Price per Admission Ticket Number of donations Value of each donation Number of animals in the Zoo Food Consumed/animal/year Overtime costs per day Number of Zoo open days 12,000 12.00 1,200 60.00 144 3,600 520.80 276 18,000 9.60 600 240.00 120 2,880 144.00 300 $ $