2 Flexible budget preparation Lo2 Garcia and Buffet, a local CPA firm, has budge

Question

2 Flexible budget preparation Lo2 Garcia and Buffet, a local CPA firm, has budgeted $100000 in fixed expenses per month for the tax department. It has also budgeted variable costs of $5 per tax return prepared for supplies, $35 per return for labour, and $10 per return for computer time. The firm expects revenue from tax return preparation to be $300000, based on 2000 tax returns at $150 each. During the current month, 1850 tax returns were actually prepared, at an average fee of $147 each. Actual variable costs were $9100 for supplies, $65000 for labour, and $18000 for computer time. Actual fixed costs were $100000. Required Prepare a flexible budget for the tax department of Garcia and Buffet for the current month.

Explanation / Answer

Flexible Budget of 1850 Tax Returns :

Garcia and Buffet Flexible budget for the month Particulars Units Per Unit Amount Sales Revenue 1850 $150 277500 Less: Variance Costs Returns for supplies 1850 $5 9250 Returns for labor 1850 $35 64750 Returns for computer time 1850 $10 18500 Contribution Margin 185000 Less: Fixed Cost 100000 Operating Income 85000

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