Howard Cooper, the president of Glacier Computer Services, needs your help. He w

Question

Howard Cooper, the president of Glacier Computer Services, needs your help. He wonders about the potential effects on the firm’s net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal year 2019:
Standard rate and variable costs
Service rate per hour $60.00
Labor cost 32.00
Overhead cost         5.76
Selling, general, and administrative cost     3.44
Expected fixed costs
Facility maintenance $320,000
Selling, general, and administrative 120,000
Required
a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 30,000 hours of service in 2019.

Explanation / Answer

a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 30,000 hours of service in 2019.

Revenue (30000*60) 1800000 Less: Operating expenses Labour cost (30000*32) (960000) Overhead cost (30000*5.76) (172800) Selling,general and administrative (30000*3.44) (103200) Factory Maintenance (320000) Fixed selling,general and administrative (120000) (1676000) Net income 124000

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