Question 1 (from exhibit 1)

revenue
expense
operating profit
profit percentage

actual
budgeted
3264000 3231900
2967610 2625550
296390
606350
9.08%
18.76

Variance (Static)
32100 F
342060 U
-309960 U
-9.68 U

Question 2 (from exhibit 2)

a) if no. of consultant is basis of production
revenue=
no. of consultant*450*% billing*hourly billing rate=
no. of consultant*30780
Flexible budget
variance (variance
budgeted
due to deviation
Consultan
cost per
Total
from budgeted
flexible
t Volume
budgete consultan Variance
actual
rate)
budget
Variance
d
t
(Static)
no. of consultant
113
0
113
9.035088
105
8
revenue
3264000
-214140 3478140
246240 3231900
30780
32100
less
consultant salary 2029050
147600 1881450
133200 1748250
16650
280800
Operat. expense
938560
-5581.9 944141.9
66841.9
877300 8355.238
61260
total expense
2967610
142018.1 2825592
200041.9 2625550 25005.24
342060
operating profit
296390
-356158 652548.1
46198.1
606350 5774.762 -309960
profit
0.09080
-0.09681 0.187614
0 0.187614 0.187614 -0.09681
operating statistics
hours billed
39000
0
38646
3090
35910
342
3090
hours supplied
50850
0
50850
3600
47250
450
3600
Average bill. rate
83.69
90
90
0.0069
hours supplied per
consultant
450
450
0
450
billing percentage
76.70%
.70%
76%
0
76%
.70%
Salary per
consultant
17956
1306
16650
0
16650
1306
billing rate per
consultant
28885
-1895
30780
0
30780
-1895

b) if billed hour is basis of production

revenue=

no. of consultant*450*% billing*hourly billing rate=

no. of consultant*30780
Flexible budget
budgeted
variance (variance
cost per
due to deviation
Consultant
unit of
Total
from budgeted
flexible
no.
billed
Variance
actual
rate)
budget
Variance
budgeted
hours
(Static)
39000
0
39000
3090
35910
3090
3264000
-246000 3510000
278100
3231900
90
32100

hours billed
revenue
less
consultant
salary
2029050
operating
expense
938560
total expense
2967610
operating
profit
296390
profit
0.090806
operating statistics
no. of
consultant
113
hours supplied
50850
average billing
rate
83.69231
hours supplied
per consultant
450
billing
percentage
76.70%
Salary per
consultant
17956.19
billing rate per
consultant
28884.96

130365.8

1898684

150434.2

1748250

48.68421

280800

-14230.3
116135.5

952790.3
2851475

75490.31
225924.5

877300
2625550

24.43052
73.11473

61260
342060

-362135
-0.09681

658525.5
0.187614

52175.48
0

606350
0.187614

16.88527
0.187614

-309960
-0.09681

-1.03509
-465.789

114.0351
51315.79

9.035088
4065.789

105
47250

8
3600

-6.30769

90

90

-6.30769

450

450

.70%

76%

76%

.70%

1306.195

16650

16650

1306.195

-1895.04

30780

30780

-1895.04

Question 3 (from exhibit 3)

variable
fix
variable component component
0.00%
15100
0
80.00%
38250
153000
80.00%
24000
96000
0.00%
22700
0
80.00%
2620
10480
80.00%
7780
31120
25.00%
16830
5610
0.00%
32200
0
0.00%
34700
0
100.00%
0
36550
80.00%
17920
71680
80.00%
4940
19760
0.00%
117260
0
100.00%
0
38500
100.00%
0
56300
25.00%
18000
6000

variable
component
per
consultant
144
364
229
216
25
74
160
307
330
0
171
47
1117
0
0
171

no. of
consultant=113
Spending
actual
variance
advertisement &
promotion
administrative &
support staff
information system
depreciation
dues 7 subscription
education & training
equipment leases
insurance
professional service
office expense
office supplies
postage
rent- real estate
telephone
travel &
entertainment
utilities

no. of consultant=113
flexible
Volume
budget
Variance

no. of consultant=105
Total Variance
budgeted
(Static)

22100

5849.524

16250.48

1150.476

15100

7000

225000
126200
23400
11800
36200
23500
33600
39500
42100
86200
27300
117260
40000

30835.71
4371.429
-1029.52
-1499.62
-3292.76
-222.286
-1053.33
2156.19
5550
-4765.33
2223.619
-8934.1
1500

194164.3
121828.6
24429.52
13299.62
39492.76
23722.29
34653.33
37343.81
36550
90965.33
25076.38
126194.1
38500

2914.286
1828.571
1729.524
199.619
592.7619
1282.286
2453.333
2643.81
0
1365.333
376.381
8934.095
0

191250
120000
22700
13100
38900
22440
32200
34700
36550
89600
24700
117260
38500

33750
6200
700
-1300
-2700
1060
1400
4800
5550
-3400
2600
0
1500

57800
26600

1500
1228.571

56300
25371.43

0
1371.429

56300
24000

1500
2600

Question 4 (from exhibit 2)

A= actual no. of consultant*actual billing rate*actual billing %*450
B= Actual no. of consultant*actual billing rate*budgeted billing %*450
C= budgeted no. of consultant*actual billing rate*Actual billing rate*budgeted billing %*450
D= budgeted no. of consultant*budgeted billing rate*Actual billing rate*budgeted billing %*450
billing %
Sales Volume
Billing rate
A
variance B
Variance
C
variance
D
Budgeted
revenue
3264000 29627.08 3234373
228982.2 3005391
-226509 3231900 3231900
no. of consultant
113
113
105
105
105
hour available
per consultant
50850
50850
47250
47250
47250
hours billed
39000
354
38646
2736
35910
0
35910
35910
average hourly
billing rate
83.69231
83.692
0 83.69231
90
90
billing
percentage
0.766962 0.006962
0.76
0
0.76
0.76
0.76
Answer
revenue variance due to productivity effect
revenue variance due to increase in consultant
revenue variance due to decrease in billing rate
Total

29627.07692 F
228982.1538 F
-226509.2308 U
32100

Question 5
Variance analysis of contract division

actual
no. of consultant
revenue
less
consultant salary
hours billed
hours supplied
average billing rate
hours supplied per
consultant
billing percentage
Salary per
consultant
billing rate per
consultant
net effect on profit

Flexible budget
variance
(variance from
budgeted rate)

flexible
budget

Consultan
t no.
Variance

budgete
d

64
1344000

0
99840

64
1244160

8
155520

56
1088640

1036800
24000
28800
56

172800
960

864000
23040
28800
54

108000
2880

756000
20160
25200
54

450
0.83333
3

450
0.033333

16200
21000

0.8

19440

19440
13500
360
450

Total
Varianc
e
(Static)
8
255360
280800

450
0

13500
1560
-72960

budgeted
cost per
consultan
t

0.8
13500

0
47520

19440
-25440

Variance analysis of Solution division

actual
no. of consultant
49
revenue
1920000
less
consultant salary
992250
hours billed
15000
hours supplied
22050
average billing
rate
128
hours supplied per
consultant
450
billing percentage
0.6802
Salary per
consultant
20250
billing rate per
consultant
39183.67
net effect on profit

Flexible budget
variance (variance
from budgeted
rate)

flexible
budget

49
-223260 2143260
0
-750

992250
15750
22050

-8.08

136.08

136.08

-8.08

-0.03401

450
0.7142

450
0.714286

0
-0.03401

20250

43740

-4556.33
-223260

20250
-4556.33
-223260

43740

0
0

49
2143260

43740

992250
15750
22050

20250
321.4286
450

Total
Variance
(Static)

0
0
0
0
0
0

due to reduction in rate

total effect on profit from two
division

Consultant
budgeted
no.
cost per
Variance
budgeted consultant

0
-223260
0
0
-750
0

due to increase in no. of consultant

-296220

Additional analysis
Main loss is coming from reduction in rate of billing per hour

47520

-248700