SUNY at Binghamton University The Kalamazoo Zoo Case Study Questions

DescriptionKS1126
Case Number 2001.0
The Kalamazoo Zoo
It was a cold drizzly morning in early March 2010 when Rory Lyons, the director of the Kalamazoo Zoo,
received the zoo’s financial information for the year ending December 31, 2009.
The situation was quite different from what Rory had expected. As he folded his umbrella, he
wondered whether the strange weather patterns were responsible for the big variances in the budget.
It had indeed been a peculiar year, weather-wise, in Kalamazoo. The winter had been the wettest on
record, while the spring and summer had been unusually warm and balmy. The winter storms had forced
the zoo to close for more days than originally planned. But the frisky spring weather had produced an
unexpected success in the animal-breeding program.
Kalamazoo, a city in the state of Michigan, was facing a tough economic environment. This year, the
zoo itself had received more state aid than expected, largely due to a renovation grant for its facilities.
However, the overall budget situation was difficult. The state was reducing the amount of local aid it
provided to the cities, forcing the city of Kalamazoo to reconsider many of its popular recreation activities.
The Mayor had just called an emergency meeting to discuss the city’s financial situation. Rory was asked to
give a detailed presentation on the zoo’s financial health and to present a preliminary budget for the next
financial year.
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Table 1: All Figures in $
KALAMAZOO ZOO Financial Statement 2009
Revenues:
ACTUAL
BUDGETED
Gate Ticket Revenue from visitors
100,000
120,000
License Revenue from the food court
100,000
100,000
Donations from individuals
50,000
100,000
Grants for the Tiger Conservation Project*
180,000
150,000
Grants for the Rhino Conservation Project*
100,000
100,000
Grants for the Yellow-billed Cuckoo Conservation Project*
120,000
100,000
Subsidies from the state government
200,000
150,000
850,000
820,000
Salary of Zoo Director
80,000
80,000
Salaries for Assistant Zoo Keepers (2 total)
100,000
100,000
Wages and Salary for Animal Handlers
100,000
100,000
Security, Office and Support staff Wages
50,000
50,000
Fringe Benefits cost for employees (health insurance, etc.)
130,000
130,000
Food and Provision costs for animals
360,000
240,000
Overtime costs
100,000
40,000
Utilities
50,000
30,000
Transportation and facilities for visitors
100,000
50,000
1,070,000
820,000
* Funds received directly from Federal government
Total Revenues
Expenditures:
Total Expenditures
QUESTION 1:
Perform a revenue and expenditure variance on the 2009 Kalamazoo budget based on the information
provided in Table 1. State whether the revenue variance is favorable or unfavorable. State whether the
expenditure variance is favorable or unfavorable. Use template #1 below to guide your analysis.
Template 1
Variance Type
Actual
Budget
Variance Amount
Favorable/
Unfavorable
Revenue Variance
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Case Number 2001.0
Expenditure
Variance
Table 2 : Operating Data
Actual
10,000
$10.00
1000
$50
120
$3000
$434/day
230
Number of Visitors
Price per Admission Ticket
Number of donations
Value of each donation
Number of animals in the Zoo
Food Consumed /animal/year
Overtime costs
Number of Zoo open days
Budgeted
15,000
$8.00
500
$200
100
$2400
$120/day
250
QUESTION 2:
Using the additional operating data on Kalamazoo provided in Table 2, compute revenue quantity variance
and price variance for annual ticket revenue and state whether each is favorable or unfavorable. What do
we know about the zoo from doing this analysis?
Template 2: Ticket Revenue Variance
Revenue Variance
Actual Quantity
Budgeted
Quantity
Budgeted
Price
Variance
Favorable/
Unfavorable
Actual Price
Budgeted Price
Actual
Quantity
Variance
Favorable/
Unfavorable
QUANTITY
Revenue
Variance
PRICE
QUESTION 3:
Using the data provided in Table 2, compute expenditure quantity and price variance for animal food
expenditures and state whether each is favorable or unfavorable. What do we learn about the Zoo from
doing this analysis?
Template 3: Animal Food Expenditure Variance
Expenditure
Variance
Actual
Quantity
Budgeted
Quantity
Budgeted Price
Variance
Favorable/
Unfavorable
Quantity
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Case Number 2001.0
Expenditure
Variance
Actual Price
Budgeted Price
Actual Quantity
Variance
Favorable/
Unfavorable
Price
QUESTION 4:
What is the overall situation at the zoo that we see from performing these variances? Reviewing these
issues and the budget, what else should Rory Lyons investigate? What information is needed to be able to
perform these analyses?
QUESTION 5:
As he was working on his budget analysis, Rory Lyons received a phone call from the Mayor. The Mayor
said that due to state budget cutbacks. The Zoo should expect to receive $100,000 less in state subsidies for
the coming year. Faced with this situation, which of the following options would you recommend to Rory
Lyons for closing the budget shortfall? Calculate the net budgetary impact for each of these options using
the actual budget:
1) Increase ticket prices to $15.00.
Rory believes this might reduce the number of visitors to the Zoo by 20%.
2) Reduce the number of animals to 100 by finding other host programs. There would be a one-time cost
of transportation of $1000 each.
3) Fire one of the two assistant zookeepers. This will require a severance payment equal to 10% of the
annual salary and a payment of full fringe benefits for 6 months. Note: the zookeepers are not the same
people as the animal handlers.
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Case Number 2001.0

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