Profit variance analysis in a service organization. Baker and Klatt (BK) is a CPA firm that gets a huge portion of its revenue from tax services. Last year, BK's billable tax hours were up 20 percent from expected levels, but, as the following data show, profits from the tax department were lower than anticipated.

Prepare a comparison of the actual results to the master and flexible budgets. Adapt the approach shown in Exhibit 10.8 to this service organization.

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Billable Hours Revenue Production Costs: Professional Salaries (all variable) Other Variable Costs (e.g., supplies. certain computer services) General Administrative (all fixed). Tax Department Profit Actual Results Master Budget 30,000 Hours 25,000 Hours $3,300,000 $3,000,000 1.850.000 1,500,000 470,000 680,000 $ 300,000 400,000 700,000 $ 400,000