Edelia Consulting Services (ECS) uses flexible budgeting. The following information was obtained to produce the draft budgets for the next budget period: 1. The average charge out rate to clients for the company's consultants is expected to be RM100 per hour. However, this rate will increase by 10% if the company's consultancy work exceeds 18,000 hours since the company will employ freelance consultants for the additional work. The premium only applies to work in excess of 18,000 hours. 2. Travel and subsistence expenses are expected to average RM10 per chargeable consulting hour. x. The average annual salary of the 12 consultants employed by the company is RM60,000 per annum. The consultants, who are employed on annual fixed contracts, are contracted to provide a maximum of 1,500 consultancy hours per annum. 4. Freelance consultants will be paid RM60 per hour. s The following inflation adjusted analysis of office expenses was obtained for the last three years: 17000 Hours Office expenses RM720,000 RM750,000 RMO 14,000 16.000 The managing director of ECS has asked the management accountant to prepare budget for three projected levels of activity. Required: Prepare a flexible budget for the three projected levels of activity at 17,000, 18,000 and 19,000 hours. Distinguish between fixed/static and flexible budgets. Explain the benefit of using a flexible budget. The managing director of your company believes that the existing annual budget system is costly to operate and produces unsatisfactory results due to long preparation period, business decision being made throughout the year, unpredictable changes in the rate of general inflation and sudden changes in the availability and price of raw material. He has read about rolling budget and wonders whether these might be more useful for his decision making. Required: Define a rolling budget term. Identify THREE (3) advantages of a rolling budget. ti Explain TWO (2) problems likely to be encountered in using a rolling budget.