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Abstract: Variance analysis is widely used in budgeting and managerial accounting, and is a required skill to be taught in any introductory budget course. The Kalamazoo Zoo is a short, amusing case for use in teaching variance analysis. The case is best taught after students have already learned the basics of variance analysis, using a standard text. [Recommended material is Variance Analysis and Flexible Budgeting, Harvard Business School Publishing, Note 9-101-039, c 2000, and the on-line HBS tutorial on variance analysis]. The Kalamazoo case may be used as a short homework assignment or an in-class group exercise.
In the case, students must determine why the Zoo is losing money. Using variance analysis, students can examine the impact of the Zoo's successful animal breeding program (which has produced a higher number of animals) and the quantity of food the animals are consuming. From this simple premise, the case can be used to discuss the revenue and expenditure implications for the Zoo, and to discuss how further variance analysis is necessary to fully understand the drivers of financial performance. The case also allows for a discussion of simple budget options that would enhance revenues and/or decrease expenditures.
Learning Objective: Rory Lyons, the director of the Kalamazoo Zoo, must analyze the performance of the zoo in 2009, comparing the actual budget results to the expected budget forecast. The case asks students to perform basic variance analysis on ticket revenues and animal food expenditures, to analyze a number of options for closing the budget shortfall, and to recommend further areas in the budget for investigation.