The Kalamazoo Zoo Harvard Case Solution & Analysis

The Kalamazoo Zoo

QUESTION 1:

Revenue and expenditure variance on the 2009 Kalamazoo budget based on the information

Provided in Table 1.

Variance Type

 

Actual BudgetVariance Amount

Favorable/

Unfavorable

Revenue Variance

 

$850,000$820,000$30,000Favorable
Expenditure Variance$1,070,000$820,000$250,000Unfavorable

QUESTION 2:

Following are revenue quantity variance and Price variance for annual ticket revenue.Using table operating data provided in the table 2.

Revenue Variance

Actual Quantity

(Visitors)

Budget Quantity

(Visitors)

Budgeted PriceVariance Amount

Favorable/

Unfavorable

Quantity

 

10,000

15,000

$8.00

$40,000

Unfavorable

Revenue Variance

Actual PriceBudgeted Price

 

Actual QuantityVariance Amount

Favorable/

Unfavorable

Price

 

$10

$8

10,000

$20,000

Favorable

Analysis:

The variance related to the revenue has two portions; one is related to the variance as a result of the quantity of the visitors budgeted and the quantity of actual visitors, from this variance analysis we can find that how much the company has extra earned from increase in the visitor number or how much the company has less earned from the budgeted figures as a result of decrease in the number of visitors.

 The price used to measurethe variance is budgeted ticket priceasthe actual ticket price may vary from budgeted ticket price and if actual ticket price is used in the variance of quantity, it will not be pure quantity variance as the price variance will also be mixed.

Second portion of the revenue variance is the variance due to the price difference between the budgeted and actual ticket price. The total variance is the multiplication of price variance per ticket and the actual number of visitors.

QUESTION 3:

Following are the expenditure quantity and price variance for animal food expenditures using the data provided in the table 2.

Expenditure Variance

Actual Quantity

(Animals)

Budget Quantity

(Animals)

Budgeted PriceVariance Amount

Favorable/

Unfavorable

Quantity

 

120

100

$2400

$48,000

Unfavorable

Expenditure Variance

Actual Price

(Per Animal)

Budgeted Price

(Per Animal)

 

Actual Quantity

(Animals)

Variance Amount

Favorable/

Unfavorable

Price

$3000

$2400

120

$72,000

Unfavorable

Analysis:

The amount of expenditure on the animal food depends upon the cost of the food provided and the quantity of the animals in the Zoo. If the cost of the animal food becomes expensive the food expenditure will increase and on the other hand the expenditure will also increase with the increase in the number of the animals in the Zoo.

Expenditure variance related to the quantity of the animals in the Zoo only shows the amount of food expenditures increased or decreased due to the difference between the budgeted animal number and the actual number of the animals. The reason behind the increase in the animal number may be due to failure of the Zoo management to maintain the number of animals in accordance to the budgeted number; this may be due to new born animal babies and increase in the purchase of animals at Zoo.

QUESTION 4:

The overall situation of the Zoo is going toward the losses as the expenditures are increasing,with more difference from the budgeted figures on the other hand revenues have been increased from the budgeted figures with small amount of difference as compared to the expenditure of the Zoo. Total expenditure was budgeted as $820,000 and the actual amount of expenditure were $250,000 more than the budget; it was $1,070,000 in the current year.

The increased expenditures of the Zoo are due to the significant increase in the expenditures of animal food, overtime and transportation facilities to the visitors. These expenses were more deviated from the budget figures this shows that the management has failed to budget the expenses properly. Management should take actions to control the expenditures of the zoo especially these three expenses..................

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