Z-Bar Pastures is a 160-hectare farm on the outskirts of Swift Current, Saskatchewan, specializing in the boarding of brood mares 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, Z-Bar 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 as follows: feed $5; veterinary fees $3; blacksmith fees $0.25; and supplies $0.55. All other expenses were either semi-fixed 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 entertained clients more.

Static Budget Income Statement Year End December 31, 2020 Baster Budget Number of mares Number of boarding days Sales Less varieble expenses Feed Veterinary Fees Blacksmith Fees Supplies Total Variable Expenses Contribution Margin Less Fixed Espenses Depreciation Insurance Utilities Repairs and Maintenance Labour Advertising Entertainment Total Fixed Expenses Net Income Actual Difference 60 21900 547500 52 19000 380000 8 2900 167500 109500 65700 5475 12045 192720 354780 104390 58838 4984 10178 178390 201610 5110 6862 491 1867 14330 153170 40000 11000 14000 11000 95000 8000 5000 184000 170780 40000 11000 12000 10000 88000 12000 7000 180000 21610 0 0 2000 1000 7000 -4000 -2000 4000 149170 F/U U U U F F F F F F F F F F U U F U Static Budget Income Statement Year End December 31, 2020 Number of mares Number of boarding days Sales Less varieble expenses Feed Veterinary Fees Blacksmith Fees Supplies Total Variable Expenses Contribution Margin Less Fixed Espenses Depreciation Insurance Utilities Repairs and Maintenance Labour Advertising Entertainment Total Fixed Expenses Net Income Baster Budget 60 21900 547500 Actual Difference 52 19000 380000 8 2900 167500 109500 65700 5475 12045 192720 354780 104390 58838 4984 10178 178390 201610 5110 6862 491 1867 14330 153170 40000 11000 14000 11000 95000 8000 5000 184000 170780 40000 11000 12000 10000 88000 12000 7000 180000 21610 0 0 2000 1000 7000 -4000 -2000 4000 149170 F/U U U U F F F F F F F F F F U U F U U U