Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Howard Cooper, the president of Munoz 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 $ 82.00
Labor cost 32.00
Overhead cost 6.50
Selling, general, and administrative cost 3.30
Expected fixed costs
Facility maintenance $ 523,000
Selling, general, and administrative 143,000

Required:

  1. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 43,000 hours of services in 2019.

  2. 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 Munoz charges customers $77 per hour, the firm can achieve 52,000 hours of services. Prepare a flexible budget using the consultants assumption.

  3. The same consultant also suggests that if the firm raises its rate to $87 per hour, the number of service hours will decline to 37,000. 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 43,000 hours of services in 2019.

MUNOZ COMPUTER SERVICES
Pro Forma Income Statement
Master Budget
Variable costs:
Fixed costs:

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 Munoz charges customers $77 per hour, the firm can achieve 52,000 hours of services. Prepare a flexible budget using the consultants assumption.

MUNOZ COMPUTER SERVICES
Pro Forma Income Statement
Flexible Budget
Variable costs:
Fixed costs:

The same consultant also suggests that if the firm raises its rate to $87 per hour, the number of service hours will decline to 37,000. Prepare a flexible budget using the new assumption.

MUNOZ COMPUTER SERVICES
Pro Forma Income Statement
Flexible Budget
Variable costs:
Fixed costs:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Management Theory And Cases An Integrated Approach

Authors: Charles W. L. Hill, Melissa A. Schilling, Gareth R. Jones

13th Edition

0357033841, 978-0357033845

More Books

Students also viewed these Accounting questions

Question

What is the central issue of the situation facing the organization?

Answered: 1 week ago