K&B is a small management consulting firm. Last month, the firm billed fewer hours than expected, and, as expected, profits were lower than anticipated.

Reported Income Statement Master Budget

Billable hours ^at 11,000 10,000

Revenue $1,280,000 $1,250,000

Professional salaries (all variable)690,000 630,000

Other variable costs (e.g., supplies, computer services)190,000 180,000

Fixed costs 295,000 300,000

Profit $105,000 $140,000