K&B; is a small management consulting firm. Last month, the firm billed fewer ho

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. Master Reported Income Statement Billable hoursa Revenue Professional salaries (all variable) Other variable costs (e.g., supplies, computer services) Fixed costs 9,750 S 825,000 407,500 121,500 203,000 S 93,000 7,350 685,000 347,500 99,500 212,500 S 25,500 Profit These 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· lf there is no effect, do not select either option.) Master Flexible Budget Sales Activity Variance Actual Cost Variances Price Variances Budget 750 hrs Revenue Professional salaries Other variable costs Fixed costs (7,350 hrs.) 685,000 347,500 99.500 212,500 S 25,500 $ 825,000 407,500 121,500 203,000 Profit $93,000

Explanation / 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 685000 63077 F 621923 203077 U 825000 Cost: -Professional Salaries 347500 40308 U 307192 100308 F 407500 -Other Variable Costs 99500 7908 U 91592 29908 F 121500 -Fixed Costs 212500 9500 U 203000 0 203000 Total Cost 659500 57715 U 63077 F 601785 130215 F 732000 Profit 25500 57715 U 63077 F 20138 72862 U 93000 Working: Master Budget Flexible Budget Actual Working-Flexible Budget Hours 9750 7350 7350 Revenue 825000 621923 685000 Cost: -Professional Salaries 407500 307192 347500 -Other Variable Costs 121500 91592 99500 -Fixed Costs 203000 203000 212500 Total Cost 732000 601785 659500 Profit 93000 20138 25500

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