Flexible budget preparation, service sector. Meridian Finance helps prospective homeowners of substantial means to find low-cost financing and assists existing homeowners in refinancing their current loans at lower interest rates. Meridian works only for cus¬

tomers with excellent borrowing capacity. Hence, Meridian is able to obtain a loan for every customer with whom it decides to work.

Meridian charges clients 1/2% ofthe loan amount it arranges. In 2005, the average loan amount per customer was $238,800. In 2006, the average loan amount was $240,252. In its 2007 flexible budgeting system, Meridian assumes the average loan amount will be $240,000.
Budgeted cost data per loan application for 2007 are Professional labour: 6 budgeted hours at a budgeted rate of $48 per hour Loan filing fees: budgeted at $120 per loan application Creditworthiness checks: budgeted at $144 per loan application Courier mailings: budgeted at $60 per loan application Office support (the costs of leases, secretarial workers, and others) is budgeted to be $37,200 per month. Meridian Finance views this amount as a fixed cost.
Required 1. Prepare a static budget for November 2007 assuming 90 loan applications.
2. Actual loan applications in November 2007 were 120. Other actual data for November 2007 were Professional labour: 7.2 hours per loan application at $50.40 per hour Loan filing fees: $120 per loan application Creditworthiness checks: $150 per loan application Courier mailings: $64.80 per loan application Office support costs for November 2007 were $40,200. The average loan amount for November 2007 was $268,800. Meridian received its 1/2% fee on all loans. Prepare a Level 2 variance analysis of Meridian Finance for November 2007. Meridian’s output measure in its flexible budgeting system is the number ofloan applications.