Background:

A company has two divisions. The divisions are Water and Waste Water. The following are the bill rates for the staff:

Vice President$250/hour

Senior Engineer$200/hour

Associate Engineer$190/hour

Staff Engineer$160/hour.

Then, we have the descriptions on what these two division did:

Water-10,000hours, a) vice president at 10% of the time b): 20% of Senior Engineer time c):10% to Associate engineers d): and remaining to Staff Engineers.

Waste Water-6,000hours, a): vice president at 12% of the time b): 20% of Senior Engineer time c): 5% to Associate engineers d): and remaining to Staff Engineers.

The following will be more data:

A): The Direct Labor costs

Vice President$90/hour; Senior Engineer$70/hour; Associate Engineer $60/hour; Staff Engineer$50/hour.

B): The utilization.

Vice President60%; Senior Engineer80%; Associate Engineer85%; Staff Engineer90%.

C): Others:

Admin Salaries$81,000; Rent$120,000; Utilities$16,000; Benefits$75,000

D): Most importantly, we assume that there are 2080 hours per year that each engineer can work.

QUESTIONS:

1).Show the static budget for the company.

2): However, the actual utilization is the following:

Vice President50%; Senior Engineer82%; Associate Engineer88%; Staff Engineer93%.

Now, write out 2a). flexible budget and 2b): calculate the Level 2/3 variances.

3): What recommendations can be made for the upcoming year in budgeting to the CFO for additional profitability and increasing revenue?

4): What approaches would your recommendations to increase the company overall utilization of staff and billable hours?

5): How will your recommendations impact customer profitability or divisional profitability?

6):The company wants to add a new division. It will be the Construction Division with 3 people. Please discuss pros and cons of adding a division and when you might consider not to add the division.