Actual data 2019

a)

b)

Evaluate whether the company should add the business advisory department. Justify your reasons using a) and b) above as well as any non-financial factors that may be relevant.

BUDGET 2020 2020 Master Budget for T&K Accounting Services Taxation Bookkeeping Advisory Total Billable hours 3,000 8,773 3,410 273 Chargeout rate per billable hour 290 689 Professional labour rate per hour 421 Professional labour hours 160 4,092 930,930 2,363 126 62 2,835 297,675 175,203 122,472 200 3,600 870,000 720,000 10,527 2,098,605 Revenue Professional labour costs 1,548,491 Gross margin 150,000 550,114 653,288 277,642 53,333 19,500 Office staff wages 53,333 53,333 19,500 7,000 160,000 58,500 Rent & Utilities Printing & stationary 7,000 21,000 IT Support 13,200 19,500 7,000 13,200 7,333 3,733 7,442 Advertising 7,333 Depreciation 13,200 7,333 3,733 21,750 125,850 24,150 3,733 23,273 127,373 150,269 39,600 22,000 11,200 52,465 364.765 Client entertainment costs Total Support costs 111,542 Budgeted Profit before tax 10,930 185,349 Schedule 2 Budget Scenario Analysis - Business Advisory Department What-if-scenario Business Advisory Business Advisory Business Advisory Billable hours Revenue Labour hours Professional labour costs Business Advisory Gross Margin Business Advisory Business Advisory ry Business Advisory Net Business Advisory Net Support Costs - | Support Costs - Profit % Change from Profit Fixed Costs Variable Costs Master budget Original budget 3,000 870,000 3,600 720,000 150,000 104,100 21,750 24,150 0% 10% reduction in billable hours 2,700 783,000 3,240 648,000 135,000 104,100 19,575 11,325 -53% 15% reduction in billable hours 2,550 739,500 3,060 612,000 127,500 104,100 18,488 4,913 -80% 25% reduction in billable hours 2,250 652,500 2,700 540,000 112,500 104,100 16,313 7,913 -133% BUDGET 2020 2020 Master Budget for T&K Accounting Services Taxation Bookkeeping Advisory Total Billable hours 3,000 8,773 3,410 273 Chargeout rate per billable hour 290 689 Professional labour rate per hour 421 Professional labour hours 160 4,092 930,930 2,363 126 62 2,835 297,675 175,203 122,472 200 3,600 870,000 720,000 10,527 2,098,605 Revenue Professional labour costs 1,548,491 Gross margin 150,000 550,114 653,288 277,642 53,333 19,500 Office staff wages 53,333 53,333 19,500 7,000 160,000 58,500 Rent & Utilities Printing & stationary 7,000 21,000 IT Support 13,200 19,500 7,000 13,200 7,333 3,733 7,442 Advertising 7,333 Depreciation 13,200 7,333 3,733 21,750 125,850 24,150 3,733 23,273 127,373 150,269 39,600 22,000 11,200 52,465 364.765 Client entertainment costs Total Support costs 111,542 Budgeted Profit before tax 10,930 185,349 Schedule 2 Budget Scenario Analysis - Business Advisory Department What-if-scenario Business Advisory Business Advisory Business Advisory Billable hours Revenue Labour hours Professional labour costs Business Advisory Gross Margin Business Advisory Business Advisory ry Business Advisory Net Business Advisory Net Support Costs - | Support Costs - Profit % Change from Profit Fixed Costs Variable Costs Master budget Original budget 3,000 870,000 3,600 720,000 150,000 104,100 21,750 24,150 0% 10% reduction in billable hours 2,700 783,000 3,240 648,000 135,000 104,100 19,575 11,325 -53% 15% reduction in billable hours 2,550 739,500 3,060 612,000 127,500 104,100 18,488 4,913 -80% 25% reduction in billable hours 2,250 652,500 2,700 540,000 112,500 104,100 16,313 7,913 -133%