Exam Saved Help Save&Exit; Howard Cooper, the president of Zachary Computer Serv
ID: 2437790 • Letter: E
Question
Exam Saved Help Save&Exit; Howard Cooper, the president of Zachary 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 Labor cost Overhead cost Selling, general, and adeinistrative cost $ 83.00 34.0 6.40 3.48 Expected fixed costs Facility maintenance Selling, general, and administrative $524,800 143,000 2:3534 k Required: the pro forma income statement that would appear in the master budget if the firm expects top services in 2019. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can services. Prepare a flexible budget using the consultant's assumption Prepare a flexible budget using the new assumption According to the consultant's analysis, if Zachary charges customers $78 per hour, the firm can achieve 45,000 hours of consultant also suggests that if the firm raises its rate to $88 per hour, the number of service hours will decline to 31,000, Complete this question by entering your answers in the tabs below Required A Required B Required CExplanation / Answer
Requirement A
ZACHARY CONMPUTER SERVICES
Pro forma Income Statement
Flexible Budget
Working
Service Revenue
$ 2,988,000.00
($83*36000)
Variable Costs
Labor Cost
$ 1,224,000.00
($34*36000)
Overhead Cost
$ 230,400.00
($6.4*36000)
Selling, General and Administrative Cost
$ 122,400.00
($3.4*36000)
Total Variable Cost
$ 1,576,800.00
Contribution Margin
$ 1,411,200.00
Fixed Costs
Facility Maintenance
$ 524,000.00
Selling, General and Administrative Cost
$ 143,000.00
Total Fixed Cost
$ 667,000.00
Net Income
$ 744,200.00
Requirement B
ZACHARY CONMPUTER SERVICES
Pro forma Income Statement
Flexible Budget
Working
Service Revenue
$ 3,510,000.00
($78*45000)
Variable Costs
Labor Cost
$ 1,530,000.00
($34*45000)
Overhead Cost
$ 288,000.00
($6.4*45000)
Selling, General and Administrative Cost
$ 153,000.00
($3.4*45000)
Total Variable Cost
$ 1,971,000.00
Contribution Margin
$ 1,539,000.00
Fixed Costs
Facility Maintenance
$ 524,000.00
Selling, General and Administrative Cost
$ 143,000.00
Total Fixed Cost
$ 667,000.00
Net Income
$ 872,000.00
Requirement C
ZACHARY CONMPUTER SERVICES
Pro forma Income Statement
Flexible Budget
Working
Service Revenue
$ 2,728,000.00
($88*31000)
Variable Costs
Labor Cost
$ 1,054,000.00
($34*31000)
Overhead Cost
$ 198,400.00
($6.4*31000)
Selling, General and Administrative Cost
$ 105,400.00
($3.4*31000)
Total Variable Cost
$ 1,357,800.00
Contribution Margin
$ 1,370,200.00
Fixed Costs
Facility Maintenance
$ 524,000.00
Selling, General and Administrative Cost
$ 143,000.00
Total Fixed Cost
$ 667,000.00
Net Income
$ 703,200.00
Note-
Fixed cost will remain the same in all the cases.
ZACHARY CONMPUTER SERVICES
Pro forma Income Statement
Flexible Budget
Working
Service Revenue
$ 2,988,000.00
($83*36000)
Variable Costs
Labor Cost
$ 1,224,000.00
($34*36000)
Overhead Cost
$ 230,400.00
($6.4*36000)
Selling, General and Administrative Cost
$ 122,400.00
($3.4*36000)
Total Variable Cost
$ 1,576,800.00
Contribution Margin
$ 1,411,200.00
Fixed Costs
Facility Maintenance
$ 524,000.00
Selling, General and Administrative Cost
$ 143,000.00
Total Fixed Cost
$ 667,000.00
Net Income
$ 744,200.00
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