Flexible Budgeting, Service Organization: Outslay & Wheeler (OW) is a CPA firm that gets a large portion of its revenue from tax services. Last year, OW's billable tax hours were higher than expected; but as shown by the following data, profits from the tax department were lower than anticipated. 

Required: Prepare a flexible budget for Outslay & Wheeler.

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Reported Income Statement Master Budget Billable hoursa Revenue Professional salaries (all variable) Other variable costs (e.g., supplies, certain computer services) Fixed costs Tax department profit 1,850,000 58,000 hours 50,000 hours $3,300,000 $3,000,000 1,500,000 470,000 400,000 580,000 600,000 $ 400,000 $ 500,000 These are hours billed to clients. They are less than the 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.