Howard Cooper, the president of Adams Computer Services, needs your help He wonders about the potential effects on the firms net income if he changes the service rate that the firm charges its customers The following basic data pertain to fiscal year 2019 Standard rate and variable costs Service rate per hour $ 84 00 Labor cost 37 00 Overhead cost 6 80 Selling, general, and administrative cost 4 00 Expected fixed costs Facility maintenance $ 516,000 Selling, general, and administrative 145,000 Required Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in 2019 A marketing consultant suggests to Mr Cooper that the service rate may affect the number of service hours that the firm can achieve According to the consultants analysis, if Adams charges customers $79 per hour, the firm can achieve 47,000 hours of services Prepare a flexible budget using the consultants assumption The same consultant also suggests that if the firm raises its rate to $89 per hour, the number of service hours will decline to 35,000 Prepare a flexible budget using the new assumption Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in 2019 ADAMS COMPUTER SERVICES Pro Forma Income Statement Master Budget Services revenue Variable costs Labor cost Overhead cost Selling, general, and administrative costs Contribution margin $0 Fixed costs Facility maintenance Selling, general, and administrative costs Net income $0 A marketing consultant suggests to Mr Cooper that the service rate may affect the number of service hours that the firm can achieve According to the consultants analysis, if Adams charges customers $79 per hour, the firm can achieve 47,000 hours of services Prepare a flexible budget using the consultants assumption ADAMS COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs $0 Fixed costs $0 The same consultant also suggests that if the firm raises its rate to $89 per hour, the number of service hours will decline to 35,000 Prepare a flexible budget using the new assumption ADAMS COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs $0 Fixed costs $0

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 08, 2024

Howard Cooper, the president of Adams Computer Services, needs your help. He wonders about the potential effects on the firms net income if he changes

Howard Cooper, the president of Adams Computer Services, needs your help. He wonders about the potential effects on the firms net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal year 2019.


Standard rate and variable costs
Service rate per hour	$	84.00
Labor cost		37.00
Overhead cost		6.80
Selling, general, and administrative cost		4.00
Expected fixed costs
Facility maintenance	$	516,000
Selling, general, and administrative		145,000

Required:

Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in 2019.
A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultants analysis, if Adams charges customers $79 per hour, the firm can achieve 47,000 hours of services. Prepare a flexible budget using the consultants assumption.
The same consultant also suggests that if the firm raises its rate to $89 per hour, the number of service hours will decline to 35,000. Prepare a flexible budget using the new assumption.

Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in 2019.

ADAMS COMPUTER SERVICES
Pro Forma Income Statement
Master Budget
Services revenue
Variable costs:
Labor cost
Overhead cost
Selling, general, and administrative costs

Contribution margin	$0
Fixed costs:
Facility maintenance
Selling, general, and administrative costs

Net income	$0

A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultants analysis, if Adams charges customers $79 per hour, the firm can achieve 47,000 hours of services. Prepare a flexible budget using the consultants assumption.

ADAMS COMPUTER SERVICES
Pro Forma Income Statement
Flexible Budget

Variable costs:




	$0
Fixed costs:



	$0

The same consultant also suggests that if the firm raises its rate to $89 per hour, the number of service hours will decline to 35,000. Prepare a flexible budget using the new assumption.