Case 2: Kalamazoo Zoo

Group F
Masoumeh Sheikhloo
Miraj Patel
Santhosh Sivarajan
Sania Sarim Tirmizi
Auden Freckleton
Overview
Kalamazoo Zoo is experiencing a financial situation due to tough economic environment.
City of Kalamazoo is reducing local aid and force to reconsider all recreational activates.
Mayor asked Kalamazoo Zoo officials to provide detailed presentation on their budget for
next financial year.
Kalamazoo Zoo Financial Statement 2009
Kalamazoo Zoo – Operating Data 2009
Revenue & Expenditure Analysis
Favorable/
Revenues Actual Budgeted Variance
Unfavorable
         
● Revenue had Gates Ticket Revenue from visitors
License Revenue from the food court
$100,000
$100,000
$120,000
$100,000
-$20,000
$0
Unfavorable
Favorable

favorable results
Donations from individuals $50,000 $100,000 -$50,000 Unfavorable
Grants for the Tiger Conservation Project $180,000 $150,000 $30,000 Favorable
Grants for the Rhino Conversation Project $100,000 $100,000 $0 Favorable
since they were Grants for the Yellow-bulled Cuckoo Conservation Project $120,000 $100,000 $20,000 Favorable
Subsidies from the state government $200,000 $150,000 $50,000 Favorable
~3.66% than Funds received directly from Federal government
 
 
 
 
 
 
 
 
 
$850,000 $820,000 $30,000 Favorable
budget
Total Revenues

Favorable/
Expenditures Actual Budgeted Variance
Unfavorable
● Expenditures          
Salary of Zoo Director $80,000 $80,000 $0 Favorable
were unfavorable Salaries for Assistant Zoo keepers (2 total)
Wages and Salary for Animal Handlers
$100,000
$100,000
$100,000
$100,000
$0
$0
Favorable
Favorable
Security, Office and Support staff wages $50,000 $50,000 $0 Favorable
since they were Fringe Benefits cost for employees (health insurance, etc)
Food and Provision costs for animals
$130,000
$360,000
$130,000
$240,000
$0
-$120,000
Favorable
Unfavorable

~30.49% higher Overtime Cost

Utilities
$100,000
$50,000
$40,000
$30,000
-$60,000
-$20,000
Unfavorable
Unfavorable
Transportation and facilities for visitors $100,000 $50,000 -$50,000 Unfavorable
than budget  
Total Revenues
 
$1,070,000
 
$820,000
 
-$250,000
 
Unfavorable
Ticket Revenue Variance

● The quantity of ticket sales were ~67% lower than budget

● The price of the tickets were ~25% higher than budget

Animal Food Expenditure Variance

● The quantity of food fed to the animals was 20% higher than budget since there were
more animals at the zoo than budgeted

● The price of the food was 25% higher than budgeted that led to unfavorable results
with the increase in animals at the zoo
QUESTION 1
Question 1
Template 1

Variance Type Actual Budget Variance Favorable/

Amount Unfavorable
Revenue $850,000 $820,000 $30,000 Favorable
Variance
Expenditure $1,070,000 $820,000 $250,000 Unfavorable
Variance
Question 1
Table 2 – Operating Data
  Actual Budgeted

Number of Visitors 10,000 15,000

Price per Admission Ticket $10 $8

Number of Donations 1000 500

Value of each Donation $50 $200
# of Animals in the Zoo 120 100
Food consumed/animal/yr. $3000 $2400

Overtime Costs $434/day $120/day

# of zoo open days 230 250
QUESTION 2
Question 2
Template 2: Ticket revenue Variance

Revenue Actual Budgeted Budgeted Variance Favorable/

Variance Quantity Quantity Price Unfavorabl
e
QUANTITY 10,000 15,000 $8.00 $40,000 Unfavorable
Question 2

Revenue Actual Budgeted Actual Variance Favorable/

Variance Price Price Quantity Unfavorabl
e
PRICE $10 $8 10,000 $20,000 Favorable
QUESTION 3
Question 3
Template 3: Animal Food Expenditure Variance

Expenditur Actual Budgeted Budgeted Variance Favorable/

e Variance Quantity Quantity Price Unfavorabl
e
Quantity 120 100 $2,400 20 Favorable
Question 3
Expenditure Actual Price Budgeted Actual Variance Favorable/
Variance Price Quantity Unfavorable

Price $3,000 $2,400 120 $72,000 Unfavorable

QUESTION 4
Question 4 (a)
- Zoo had a fairly unfavourable year
- Ticket sales were down but ticket prices were higher than budgeted i.e. $10 (actual)
and $8 (budgeted)
- The loss we see of $40,000 is actually a loss of $20,000 because of increase in price
- Unfavourable increase in cost to feed animals of $600 per animal
- This is because more animals are breeding and this increases cost of food
- Animal population is estimated to increase by 20 heads
- This is not a negative circumstance as more animals will be beneficial for the zoo
- The zoo can sell the animals to other zoos to obtain a profit - which should be greater
than the price of food to feed these extra animals.
-
- Also from the data from the zoo, there will be an increase of 500 in the number of
donation that will bring a profit of $100,000.
- The value of each donation will reduce by $50 which shows a $150,000 unfavorable
loss.
- This is why zoo will have an unfavourable variance of $50,000
- Also the overall actual time cost of $100,00 is far greater than the actual budgeted of
$40,000.
- This will add more pressure to the revenue.
Question 4 (b)
- Unfavourable increase in the cost of animal and the provision of $600 of each animal
which due to high breeding was revived this year.
- The increase of 20 heads was the main reason for the deficit as feeding the food to
the animals was over budget.
- The value also lies in the additional animals being born that can be sold at a profit to
other zoos
- Kalamazoo Zoo should research on how much it would cost for one animal to be fed,
along with how much the food of the animal would cost.
- The increase in the ticket price should also be looked into with respect to its own
relation to the decline of the tickets sold earlier.
- To configure the deficits we need to know how many tickets were sold in that one
particular day.
Question 4 (c)
- Analyzing the situation critically we can see that the zoo really had a good revenue
stream to help maintain their budgeted expenditure on the food.
- This provision is understandable as there were more animals to feed.
- The question, however arises on the exceeding budget of the transportation and the
facilities for the visitors.
- This case will state that the winter storm had forced the zoo to close resulting in less
visitors and hence fewer transportation facilities would be needed.
QUESTION 5
Question 5 (i) -Increase ticket prices to $15.00
- Rory believes this will decrease the number of visitors to the zoo by 20%
- Thus number of visitors will decrease by 20% which would be 8,000 (80% x 1,000)
visitors.
- Income will change as amount will be expanded to $105,000 [(15,000 - 8,000) x $8]
negatively.
- Additionally income relating to the price with cost will be $56,000 [($15 - $8) x
8,000] ideal.
- Net impact would be $36,000 (56,000 - 20,000) increase.
Question 5 (ii) -Reduce the number of animals to 100
by finding other host programs.
- To decrease animals to 100 will result in increase in the expenditure by $2,000 (20 x
1,000).
- This will then increase the unfavourable expenditure of the variance to $252,000.
- Therefore savings in food however will cause expenditures of $48,000 (20 x 2,400)
- The unfavourable expenditure of the variance will then become $204,000 (252,000 -
48,000)
- Hence the unfavourable expenditure of the variance that related to quantity of the
animals will become $60,000 [(3,000 - 2,400) x 100]
Question 5 (iii) - Fire one of the two assistant zoo
keepers
- By using the option of sacking one of the zoo keepers means a severance package
will have to be put into effect.
- This is equal to 10% of total annual salary and the payment of the full fringe that is a
benefit for 6 months.
- Zoo will save approximately $8,125 by sacking one of the assistant keepers.
- Also by doing so the overall expenses will be reduced to almost $53,125.
CONCLUSION
- Rory Lyons should consider firing one assistant zookeeper.
- He should also consider improving his assumption regarding the revenue and
expenses for the zoo.
- He could have expected to incur a loss in the years 2009 - 2010 as the U.S. economy
was undergoing a crisis.