Expand Your Critical Thinking Decision-Making Across the Organization 110.1 Service Green Pastures is a 400-acre farm on the outskirts of the Northwich, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry eeding activities, and it has made the boarding business extremely competitive To meet the competition, Green Pastures planned in 2020 to entertain clients, advertise more extensively. and absorb expenses formerly paid by clients such as veterinary and blacksmith fees. The budget report for 2020 is presented below. 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 1 new advertising brochure and did more entertaining of clients.' Green Pastures Static Budget Income Statement For the Year Ended December 31, 2020 Actual Master Budget Difference Number of mares 52 81 19.000 21,900 380,000 2,900 U 167,500 U 547,500 Number of boarding days Sales Less: Variable expenses Feed Veterinary fees Blacksmith fees Supplies Total variable expenses Contribution margin 104,390 58,838 4.984 10,178 178,390 201.610 109.500 65,700 5,475 12,045 192,720 354.780 5.110 F 6,862 F 491 F 1,867 F 14,330 F 153,170 U Data for this case are based on Hans Sprohge and John Talbott. "New Applications for Variance Analys of Accountancy (AICPA, New York). April 1989, pp. 137-141 e Analysis," Journal Expand Your Critical Thinking 10-49 Actual Master Budget Difference Less: Fixed expenses Depreciation Insurance Utilities Repairs and maintenance Labor Advertisement Entertainment Total fixed expenses Net income 40.000 11.000 12.000 10.000 88.000 12.000 7.000 180,000 21.610 40,000 11.000 14.000 11.000 95,000 8.000 5.000 184,000 170,780 2.000 F 1,000 F 7,000 F 4.000 U 2,000 U 4,000 F 149,170 U Instructions obow with the class divided into groups, answer the following. a. Based on the static budget report: 1. What was the primary cause(s) of the loss in net income? 2. Did management do a good, average, or poor job of controlling expenses? 3. Were management's decisions to stay competitive sound? b. Prepare a flexible budget report for the year. c. Based on the flexible budget report, answer the three questions in part (a) above. What course of action do you recommend for the management of Green Pastures