K&B; is a small magemenl cursulürg frm. Last month, he Irm biled fewer hours Iha

Question

K&B; is a small magemenl cursulürg frm. Last month, he Irm biled fewer hours Ihamexpecled, ad, s expec ed, prolils were luxer Ihan anlicipaled. Reported Incame Master 7,310 $681000 345 500 9,100 210,500 B lable hours Rever le $821 con 405,500 21.100 202.200 Cther variable costs(ag, supplies, computer savicas) Fixed costs Prort 25,900 92.200 These are nours biled to clents. They are terer than the number c nours workec because there is ncnbm e.g., sackpenods, tme in train ng sess ons) and because some tme worked tor clients is not charged to them Required: Prepare a profit variance analysis fr K 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.) aster Actual (1,310 hrs. S 631,000 Flexible Sales Activity Budget Price Variances Rudyel Variance Revenue Proiessioa345.500 Othe vaiae Loss Fixed costs S B21,00O 405,5C0 121,100 202,200 S 9220O 210500 5 25,200 Prat

Explanation / Answer

Ans. Actual Cost Variances Price Variances Flexible Sales Activity Master (7310 hrs.) Budget (7310 hrs.) Variance Budget (9550 hrs.) Revenue 681000 52570   F 628430 192570 U 821000 Professional salaries 345500 35112   U 310388 95112 F 405500 Other variable costs 99100 6405     U 92695 28405 F 121100 Fixed costs 210500 8300     U 202200 0 no effect 202200 Profit 25900 2753      F 52570   F 23147 69053 U 92200 *Calculations for flexible budget: Revenue 821000/9550*7310 Professional salaries 405500/9550*7310 Other variable costs 121100/9550*7310 Fixed costs (same as planning budget) 202200 *Cost variance = Actual results - Flexible budget *Price variance = Actual revenue - Flexible revenue *Sales activity variance = Flexible budget - Planning budget *Profit variance = Actual profit - Flexible profit = 2753 f Increase in Revenue and Profit = favorable. Decrease in Revenue and Profit = Unfavorable.

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