K&B; is a small management consulting firm. Last month, the firm billed fewer ho
ID: 2522714 • Letter: K
Question
K&B; is a small management consulting firm. Last month, the firm billed fewer hours than expected, and, as expected, profits were lower than anticipated. Reported Income Master Budget Billable hoursa Revenue Professional salariesavariable) Other variable costs (e.g., supplies, computer services) Fixed costs Statement 11,500 $1,230,000 665,000 175,000 295,000 $ 95,000 10,000 $1,200,000 605,000 160,000 300,000 S 135,000 Profit aThese are hours billed to clients. They are fewer than the number of hours worked because there is nonbillable time (e.g., slack periods, time in training sessions) and because some time worked for clients is not charged to them. Required Prepare a sales activity variance analysis. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Flexible Budget Sales Activity Variance Master Budget Revenue Costs Professional salaries Other variable costs Fixed costs Total costs ProfitExplanation / Answer
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Flexible Sales Activity Variance Master Budget Revenue 1380000 180000 F 1200000 Cost: -Professional Salaries 695750 90750 U 605000 -Other Variable Costs 184000 24000 U 160000 -Fixed Costs 345000 45000 U 300000 Total Cost 1224750 159750 U 1065000 Profit 155250 20250 F 135000 Working: Master Budget Flexible Budget Working Hours 10000 11500 Revenue 1200000 1380000 1200000/10000*11500 Cost: -Professional Salaries 605000 695750 605000/10000*11500 -Other Variable Costs 160000 184000 160000/10000*11500 -Fixed Costs 300000 345000 300000/10000*11500 Total Cost 1065000 1224750 Profit 135000 155250Related Questions
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