CASE QUESTION Bedford Property Management ("Bedford") is a facilities management company with operations across the country. The owners of office buildings contract Bedford to perform all maintenance functions for their buildings. Tenants in office buildings phone Bedford when a service problem arises such as a malfunctioning elevator, a burned-out light, or a broken furnace. Bedford dispatches a service team to address the problem and charges the property owner for the service call. The number of service calls received by Bedford fluctuates over the year: calls peak during the summer months and decline toward the Christmas holidays. Bedford guarantees that service issues will be addressed within 3 hours of a tenant phoning in about a problem. This policy has given Bedford an edge over its competition. Some service jobs take more time than others. At the start of each year, Bedford creates an annual budget for revenues, direct expenses, and fixed costs. Variances are calculated between actual results and budget on a monthly basis. In December, Bedford received and responded to 10,000 service requests. It billed clients at an average rate of $100 per service call. December's budget called for 15,000 service requests to be processed at an average rate of $110 per job. The monthly budget figures reflect annual figures divided by 12. For each service job, Bedford budgets 2 hours of direct labour at $25 per hour. In December, Bedford actually incurred 25,000 hours of labour at $30 per hour. For December, Bedford budgeted for fixed overhead of $100,000. Monthly budget figures for fixed overhead reflect annual figures divided by 12. Fixed overhead includes such expenses as heating and electricity at Bedford's head office, and maintenance on Bedford's service equipment (which is usually carried out in December). Actual overhead expenses incurred for December were $125,000. Ms. Kim is the general manager of Bedford's operations. When she was hired in November, the president instructed her to "run a tight ship . . . cost overruns from budget must be eliminated in any way possible, including by downsizing our service staff." Ms. Kim is a little apprehensive because early indications are that December was not a great month for Bedford. However, she is not quite sure whether Bedford's results actually reflect reality. She is also uncertain about which performance variances she ought to be held accountable for. She has hired you to calculate variances from budget and help her analyze them. Required 1. Calculate appropriate variances to understand Bedford's performance. Then suggest potential causes for these variances, and identify which variances Ms. Kim should be accountable for. 2. Do the calculated variances adequately capture Bedford's performance? Explain. Specifically identify any concerns you have with respect to the calculated variance figures and what they imply. What steps should Ms. Kim take in responding to these variances?