Curtis Salter, the president of Kasimer Computer Services, needs your help. He w

Question

Curtis Salter, the president of Kasimer 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 2015. Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost $ 90.00 39.00 6.30 3.60 Expected fixed costs Facility maintenance Selling, general, and administrative $517,000 149,000 Required a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 35,000 hours of services in 2015 KASIMER COMPUTER SERVICES Pro Forma Income Statement Master Budget Variable costs Fixed costs

Explanation / Answer

Income statement Partriculars Option a Option b Option c Qty 35000 42000 28000 Rate 90 85 90 Services revenue 3150000 3570000 2660000 Variable costs Labour 1365000 1638000 1092000 OH 220500 264600 176400 Selling and admin 126000 151200 100800 Total 1711500 2053800 1369200 Fixed costs Facility maintenance 517000 517000 517000 Selling and admin 149000 149000 149000 Total 666000 666000 666000 Total costs 2377500 2719800 2035200 Net Profit (Revenue - costs) 772500 850200 624800

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