Flexible budget preparation, service sector. (45 minutes) Munzel GmbH helps prospective homeowners of substantial means to find lowcost financing and assists existing homeowners in refinancing their current loans at lower interest rates. Mtinzel works only for customers with excellent borrowing potential. Hence, Mtnzel is able to obtain a loan for every customer with whom it decides to work.

Miinzel charges clients 0.5% of the loan amount it arranges. In 2000, the average loan amount per customer was DM 199,000. In 2001, the average loan amount was DM 200,210. In its 2002 flexible budgeting system, Mtinzel assumes the average loan amount will be DM 200,000.

Budgeted cost data per loan application for 2002 are

®@ Professional labour: 6 budgeted hours at a budgeted rate of DM 40 per hour

® Loan filing fees: budgeted at DM 100 per loan application

® Credit-worthiness checks: budgeted at DM 120 per loan application

® Courier mailings: budgeted at DM 50 per loan application Office support (the costs of leases, secretarial workers and others) is budgeted to be DM 31,000 per month. Munzel GmbH views this amount as a fixed cost.

5987 REQUIRED 1. Prepare a static budget for November 2002 assuming 90 loan applications.
2. Actual loan applications in November 2002 were 120. Other actual data for November 2002 were Professional labour: 7.2 hours per loan application at DM 42 per hour Loan filing fees: DM 100 per loan application Credit-worthiness checks: DM 125 per loan application Courier mailings: DM 54 per loan application Office support costs for November 2002 were DM 33,500. The average loan amount for November 2002 was DM 224,000. Minzel received its 0.5% fee on all loans. Prepare a Level 2 variance analysis of Miinzel GmbH for November 2002. Munzel’s output measure in its flexible budgeting system is the number of loan applications.
3. Calculate professional labour price and efficiency variances for November 2002. (Calculate labour price on a per-hour basis.)
4. What factors would you consider in evaluating the effectiveness of professional labour in November 2002?