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. Z-BAR PASTURES Static Budget Income Statement Year Ended December 31, 2020 Master Budget Actual Difference Number of mares 60 52 8 U Number of boarding days 21,900 19.000 2.900 U Sales $547,500 $380,000 $167,500U Less variable expenses Feed 109,500 104,390 5,110 F Veterinary fees 65,700 58.838 6,862 F Blacksmith fees 5,475 4,984 491 F Supplies 12,045 10,178 1.867 F Total variable expenses 192,720 178,390 14,330 F Contribution margin 354,780 201.610 153,170 U Less fixed expenses Depreciation 40,000 40,000 Insurance 11,000 11,000 0 Utilities 14.000 12,000 2,000 F Repairs and maintenance 11,000 10,000 1,000 F Labour 95,000 88,000 7.000 F Advertisement 8,000 12,000 4,000 U Entertainment 5,000 7,000 2,000 U Total fixed expenses 184.000 180.000 4,000 F Net income $170,780 $21,610 $149,170 U 0 1) Prepare a flexible budget report for the year. Z-BAR PASTURES Income Statement Flexible Budget Report For the Year Ended December 31, 2020 Favourable Unfavourable Neither Favourable nor Unfavourable Difference Favourable Unfavourable Neither Favourable nor Unfavourable Budget Actual $ 2 3 1 5 5 3 > 3 > > C 5 5 - 3 9