Ig a rt Lever submission) Skysong, Inc. 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 decine in breeding activities, and it has made the boarding business extremely competitive. To meet the competition, Skysong, Inc. planned in 2017 to entertain clients, advertise more extensively, and absorb expenses formerly paid by dients such as veterinary and blacksmith fees. The budget report for 2017 is presented below. As shown, the static income statement budget for the year is based on an expected 18,000 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. Skysong, Inc. Statie Budget Income Statement For the Year Ended December 31, 2017 Actual Master Budget Difference 8 Unfavorable 18,000 2,400 Unfavorable 15,600 $311,600 $450.000 138,400 Unfavorable Number of mares Number of boarding days Sales Less: Variable expenses Feed Veterinary fees Blacksmith fees Supplies Total variable expenses Contribution margin Less Fixed expenses Depreciation Insurance 85,600 48,247 4,087 3346 146,20 165,320 90,000 54,000 4.500 9,900 158.400 291,600 4.400 Favorable 5.753 Favorable 413 Favorable 1.514 Favorable 12,120 Favorable 126,280 Unfavorable 33,000 9.000 10,000 3.000 72.000 33,000 9,000 11,000 9,000 78.000 1.000 Favorable 1.000 Favorable 000 Favorable Repairs and maintenance Skysong, Inc. Static Budget Income Statement For the Year Ended December 31, 2017 Actual Master Budget Difference Number of mares 52 60 8 Unfavorable Number of boarding days 15,600 18,000 2,400 Unfavorable Sales $311,600 $450,000 $138,400 Unfavorable Less: Variable expenses Feed 85,600 90,000 4,400 Favorable Veterinary fees 48,247 54,000 5,753 Favorable Blacksmith fees 4,087 4,500 413 Favorable Supplies 8,346 9,900 1,554 Favorable Total variable expenses 146,280 158,400 12,120 Favorable Contribution margin 165,320 291,600 126,280 Unfavorable Less: Fixed expenses Depreciation 33,000 33,000 Insurance 9,000 9,000 Utilities 10,000 11,000 1,000 Favorable Repairs and maintenance 9,000 1,000 Favorable Labor 72,000 6,000 Favorable 78,000 10,000 Advertisement 7,000 3,000 Unfavorable 4,000 6,000 2,000 Unfavorable Entertainment Total fixed expenses 148,000 3,000 Favorable $17,320 Net income $140,600 $123,280 Unfavorable 8,000 151,000 Skysong, Inc. Income Statement Flexible Budget Report For the Year Ended December 31, 2017 Difference Favorable Unfavorable Budget Actual Neither favorable nor unfavorable 15,600 BD 15,600 BD Boarding days (BD)
