I need assistance in preparing a flexible budget based on the following scenario and information.

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.

Green Pastures

Static Budget Income Statement

For the Year Ended December 31, 2017

Actual Master Budget Difference

Number of Mares 52 60 8 U

Number of Boarding Days 19,000 21,900 2,900 U

Sales $380,000 $547,500 $167,500 U

Less: Variable Expenses

Feed 104,390 109,500 5,110 F

Veterinary Fees 58,838 65,700 6,862 F

Blacksmith Fees 4,984 5,475 491 F

Supplies 10,178 12,045 1,867 F

Total Variable Expenses 178,390 192,720 14,330 F

Contribution Margin 201,610 354,780 153,170 U

Less: Fixed Expenses

Depreciation 40,000 40,000 -0-

Insurance 11,000 11,000 -0-

Utilities 12,000 14,000 2,000 F

Repairs and Maintenance 10,000 11,000 1,000 F

Labor 88,000 95,000 7,000 F

Advertisement 12,000 8,000 4,000 U

Entertainment 7,000 5,000 2,000 U

Total Fixed Expenses 180,000 184,000 4,000 F

Net Income $21,610 $170,780 $149,170 U