Garcia and Buffet, a local CPA firm, has budgeted $100,000 in fixed expenses per
ID: 2348370 • Letter: G
Question
Garcia and Buffet, a local CPA firm, has budgeted $100,000 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 labor, and $10 per return for computer time.
The firm expects revenue from tax return preparation to be $300,000, based on 2,000 tax returns at $150 each. During the current month, 1,850 tax returns were actually prepared, at an average fee of $147 each. Actual variable costs were $9,100 for supplies, $65,000 for labor, and $18,000 for computer time. Actual fixed costs were $100,000.
Required
Prepare a flexible budget for the tax department of Garcia and Buffet for the current month.
Revenue
$
Variable Expenses:
Supplies
Labor
Computer time
Total Variable Expense
Contribution Margin
Fixed Expense
Net Income
$
Explanation / Answer
________| Actual | Budget | Variance-Favorable/(Unfavorable) Revenue |271,950| 277,500 | (5,550) Variable Expenses: Supplies |9,100|9,250| 150 Labor | 65,000|64,750| (250) Computer time |18,000|18,500|500 Total Variable Expense |92,100|92,500|400 Contribution Margin |179,850|185,000| (5,150) Fixed Expense | 100,000|100,000| - Net Income| 79,850 | 85,000 | (5,150)
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