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Bill Jenkins runs "Dog Lovers Lid" a dog boarding kennels, mainly aimed at holiday 8.546(A) 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 F - Favourable A - Adverse 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 Question continues on next page 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 3 (continued) 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 Bill Jenkins is concerned about the much lower profit for the quarter compared to costs $1.00 per day per dog irrespective of the size of the dog. the budget. Except for favourable variances on fixed expenses for repairs and Bill Jenkins is not an accountant but has tried to prepare a master budget for maintenance and the money for additional vet charges everything is unfavourable. the financial quarter to 31.12.20 based on the information above. The budget, The supplier of Feed and Supplies warned Bill that these costs would increase by the actual performance and the variances he has prepared are shown below: 10% (based on the figures used in the budget), so the kennels have attempted to take care not to waste food. Kennel fees charges and veterinary and grooming Dog Lovers Performance Report for 3 months (91days) ended 31.12.2020 rates have stayed the same during the period. Master Actual Variance* Required: Budget Standard (per Dog per Budget Net income Day) a) Explain the purpose of standard costs and revenues using a variable (marginal) Number of dogs boarded cost system. 364 550 (3 marks) Number of boarding days 3640 3560 160(A) E b) Bill Jenkins may not have used the correct approach to his performance report. Revenues E E Boarding Fees $20.00 E72,800 $71,240 (1.560(A) Using any calculations you consider appropriate, provide a revised financial Additional vet fees 450 450( F) report, including all possible variances. In particular provide a sales mix 72,800 71,690 1.110(A) variance broken down by number of small and large dogs and planning and Total revenues Less variable expenses operating variance for feed and supplies. 1.00 3,640 226(A) (12 marks) Feed & supplies 3,866 Veterinary fees 2.00 7,280 11,300 4,020 (A) c) Write a brief report to Bill Jenkins on the financial performance of the kennels Grooming fees 1.50 5.460 8.250 2.790 (A) for the quarter giving advice for the future. (5 Total variable expenses 4.50 16.380 23.416 7.036(A) marks) Contribution margin 15.50 56,420 48.274 8,146(A) Less fixed expenses Depreciation & 6,000 6,000 insurance 3,000 3.20 200 (A) Rates, light and heat 1,000 400 600 (F) Repairs maintenance 18,000 800 (A) Labour 18.800 Total fixed expenses 28.000 28.400 400(A) Net income 28.420 19.874