Kalamazoo Zoo

KALAMAZOO ZOO

The city of Kalamazoo from the state of Michigan is in a tough economic position. The city has been experiencing poor weather patterns which have been affecting the Kalamazoo Zoo forcing the zoo close more day than expected. Additionally, the weather has increased the success in the animal breeding program.  The zoos financial information for the year 2009 states that it affected variances in the budget due to the poor weather conditions. The states have reduced the amount of local aid which has put the city of Kalamazoo in a tough position to reconsider popular recreation activities. The purpose of the analysis will examine the zoos financial health and discuss decision-making on financial changes to the budget to continue running the zoo.

Background

Kalamazoo Zoo director Rory Lyons received the zoo's financial information for the year 2009. Both the city if Kalamazoo and the Kalamazoo Zoo have been experiencing a “winter that had been the wettest on record, while the spring and summer had been unusually warm and balmy” (Harvard Case Study). Director Rory Lyons believes that “the strange weather patterns were responsible for the big variances in the budget” (Harvard Case Study). The weather conditions have forced the zoo to close more days than expected. Additionally, the city of Kalamazoo in the state of Michigan is in a tough economic standpoint. The zoo received more state fund ($30,000) than expected to renovate the facilities. However, the state has reduced local aid to cities which are pressuring the city of Kalamazoo to reconsider popular recreation activities. The mayor seeks an emergency meeting to discuss the city’s financial state. Rory Lyons purpose is to give a detailed presentation of the zoo's financial health and a preliminary budget for the upcoming year.  

Analysis

The first table presented provides a detailed presentation of the revenue variance and expenditure variance with either stating if it is favorable or unfavorable. The actual revenue variance is $850,000, and the budgeted amount is $820,000 with a variation amount of $30,000 proving that it is favorable. The expenditure variance actual budget is $1,070,000 with the estimated amount of $820,000 that states the zoo is spending more that the budget amount and a variation amount of $250,000. The zoo must reconsider a strategic plan to make adjustments to the budget and expenditure for the upcoming year. The operation date states that the number of visitors of an actual quantity of (10,000) was less than expected of (15,000) a 5,000 difference. The number of actual visitors has affected the zoo's financial revenue and expenses. The weather has been a contributing factor of the zoo being opened from actual 230 days to the budgeted 250 a 20-day difference.

The Kalamazoo Zoo number of animals has increased from the actual amount of 120 vs. the budgeted amount of 100 lead to a 20 animal increase. It is due to “Frisky spring weather had produced an unexpected success in the animal breeding program” (Harvard Case Study). This lead towards an increase of money spent towards food animals consumed. The Ticket Revenue Variance explains the quantity of visitors and price per ticket.  The budgeted price of $8.00 at an amount of 10,000 is less than the estimated number of 15,000 is unfavorable with a variance of (-40,000). The price of the ticket at the actual price of $10.00 instead of $8.00 at the actual quantity of (10,000) is favorable with a variance of $20.000.  The animal food expenditure at the amount of 120 from the budgeted number of 100 at the price of $2,400 is unfavorable with a variance of $-48,000. The actual cost of $3,000 from the budgeted price of $2,400 of the quantity of 120 is unfavorable with a variance of -$72,000.  

The mayor of the city Kalamazoo is expecting to make cutbacks to the zoo by receiving $100,000 less in state subsidies for the following year. The zoo needs to develop a strategic plan to deal with the cutbacks for the following year. The proposed cutbacks the zoo will need to implement are increasing the ticket price, reducing the number of animals and firing one assistant zoo keeper. By increasing the ticket price to

Raising the ticket prices by $15.00 instead of the current amount $10.00 will enhance their revenue by $20,000 more especially since we were projecting a 20% (8,000) reduction of visitors. The outcome of this approach is favorable because they will increase their revenues by $20,000. Further, reducing animals in the zoo from 120 to 100 will also save the zoo some money. It will save them money for animal food consumption, and nearly $60,000 will save after these cutbacks, but it cost them $1,000 for each animal for transportation with a total dollar amount of $20,000 for 20 animals. Finally, eliminating one assistant zookeeper will save the Kalamazoo Zoo nearly $75,000 which includes the six months’ fringe benefits and 10% annual salary.

Conclusion

The purpose of this analysis was to determine the best approach for the Kalamazoo Zoo cutbacks. The recommendations that were mentioned above are all favorable methods since the zoo will increase their revenues than facing another deficit for the upcoming year. Since the Mayor of Kalamazoo will cut back $100,000 for state subsidies to the zoo, all three approaches will overcome that obstacle. Since the zoo suffered from an enormous financial deficit due to the state financial crisis and poor weather conditions, the zoo learned from their past deficit experience and all three options mentioned above would increase their revenues and become more financial stability.