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

Question

Howard Cooper, the president of Solomon 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 administrative cost 83.00 38.00 6-70 4.20 Expected fixed eosts Facility saintenance Selling, general, and administrative $524,000 144,000 Required: pro forma incomp statement that would appear in the master budget if the firm expects to provide 42.000 hours of services in 2019. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours achieve. According to the consultant's analysis, if Solomon charges customers $78 per services. Prepare a flexible budget using the consultant's assumption hour, the firm can achieve 52000 hours of arefgests that if the firm raises its rate to $88 per hour, the number of service hours will decine to 35.000 Prepare a flexible budget using the new assumption will decline to 35,000. Prepare a fewible budet singnshumipnonises ts rate io $8 per hour the number of service hours wll decdine to 35,000

Explanation / Answer

ReqA: SOLOMON COMPUTER SERVICES PROFORMA INCOME STATEMENT MASTER BUDGET Service Revenue (42,000 hours @83 per hour) 3486000 Less: variable cost: labour cost (42,000 hours @ 38) 1596000 Overheads cost (42,000 hours @6.70) 281400 Selling, General and Admin Cost (42,000 hours@4.20) 176400 Contribution Margin 1432200 Less: Fixed Cost Facility Maintenance 524,000 Selling, General and Admin Cost 144,000 Net Operating Income 764,200 Req B: SOLOMON COMPUTER SERVICES PROFORMA INCOME STATEMENT FLEXIBLE BUDGET Service Revenue (52,000 hours @78 per hour) 4056000 Less: variable cost: labour cost (52,000 hours @ 38) 1976000 Overheads cost (52,000 hours @6.70) 348400 Selling, General and Admin Cost (52,000 hours@4.20) 218400 Contribution Margin 1513200 Less: Fixed Cost Facility Maintenance 524,000 Selling, General and Admin Cost 144,000 Net Operating Income 845,200 ReqC: SOLOMON COMPUTER SERVICES PROFORMA INCOME STATEMENT FLEXIBLE BUDGET Service Revenue (35,000 hours @88 per hour) 3080000 Less: variable cost: labour cost (35,000 hours @ 38) 1330000 Overheads cost (35,000 hours @6.70) 234500 Selling, General and Admin Cost (35,000 hours@4.20) 147000 Contribution Margin 1368500 Less: Fixed Cost Facility Maintenance 524,000 Selling, General and Admin Cost 144,000 Net Operating Income 700,500

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.