K&B is a small management consulting firm. Last month, the firm billed fewer hou
ID: 2524742 • 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.
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 profit variance analysis for K&B. (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.)
Reported Income Statement Master Budget Billable hoursa 7,250 9,250 Revenue $ 675,000 $ 815,000 Professional salaries (all variable) 342,500 402,500 Other variable costs (e.g., supplies, computer services) 98,500 120,500 Fixed costs 207,500 201,000 Profit $ 26,500 $ 91,000Explanation / Answer
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Actual Cost Variance Price Variance Flexible Budget Sales Activity Variance U/F Master Budget (Acutal-Flexible) (Acutal-Flexible) Revenue 675000 36216 F 638784 176216 U 815000 Cost: -Professional Salaries 342500 27027 U 315473 87027 F 402500 -Other Variable Costs 98500 4054 U 94446 26054 F 120500 -Fixed Costs 207500 6500 U 201000 0 201000 Total Cost 648500 37581 U 36216 F 610919 113081 F 724000 Profit 26500 37581 U 36216 F 27865 63135 U 91000 Working: Master Budget Flexible Budget Actual Working-Flexible Budget Hours 9250 7250 7250 Revenue 815000 638784 675000 815000/9250*7250 Cost: -Professional Salaries 402500 315473 342500 402500/9250*7250 -Other Variable Costs 120500 94446 98500 120500/9250*7250 -Fixed Costs 201000 201000 207500 201000/9250*7250 Total Cost 724000 610919 648500 Profit 91000 27865 26500
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