please help with explanation thanks.
As an example. AccuTax. Inc..provides tax services to small firms and individuals. Itexpects to have the following revenues from preparing tax returns for the year ended August 31, 2016 Tax returns for business firms S1,000,000 Individual tax returns: $1,640,000 Simple returns Complex returns ,200,000 2,840,000 Total revenue $3,840,000 The firm has 2 partners, 8 senior consultants, and 20 consultants. On average, a partner orks 50 hours a week and is paid S250.000 a year. Both senior consultants and consul expected to work 40 hours a week and are paid, respectively, $90,000 and $60,000 a year. he annual compensation for supporting staff is S40.000 per full-time equivalent. The numbe of supporting staff varies with the size of the firm. In general, one supporting staff person is eded for every 2 partners, one for every 4 senior consultants. and one for every 10 consul nts. After allowing for vacation, sickness, and continuing education days, the weeks per ear available to work with clients are 40 weeks for each partner, 45 weeks for each sent consultant, and 48 weeks for each consultant. All partners and senior consultants are full-time rofessional staff members. The firm estimates the following required professional staff tim or each hour spent to complete a tax retum: Business Return Complex individual Simple Individual Partne 0.4 hou 0.1 hou Senior consultant 0.6 hou 0.4 hou 0.1 hou Consultant 0.5 hou 0.9 hou General and administrative expenses are estimated as S150.000 per year, plus 10% of the total yroll. The firm charges $250 per hour for business retums, S100 per hour for individual retu th complicated tax matters, and S50 per hour for mple individual tax retums. The budge ues and the total hours for each of the retums for the coming year are as follows Budgeted Revenue Hourly Charge Rate Required Hours Business returns S1,000,000 $250 4,000 Individual returns: Simple returns 32,800 Complex returns 2,000 Total S3,840,000 48,800 The following table shows the professional staff requirements for the budgeted revenue: Total Hours Partner Senior Consultant Consulta 2,400 usiness returns Complex individual returns 4,800 imple individual returns 32,800 3,280 29520 Total hours 48,800 2,800 0,480 35,520 ours per week (given) 40 umber of weeks worth of work 262 eks per year/professional taff (given) 45 umber of professional staff embers needed 5.8 8.5 Part Two Planning and Decision Making ACCUTAX, INC. Budgeted Operating Income Budgeted Income S ment h No Change in Staffing For the year ended August 31, 2016 810,000 Payroll expense 2 x $250,000 500,000 Senior consultant 8 x 90.000 20 x$ 60,000 Supporting staff 5 X 40,000 General and administrative expenses $150,000 (10% x S2620,000) 412.000 Operating income 808,000 The budget shows that AccuTax has sufficient professional staff to support the expected activity. Assuming AccuTax plans no change in personnel and maintains the same staff level ts budgeted operating income will be $808,000. as shown in Exhibit 10.18
