PR $9-41($Algo$)$ Revised Operating Budget; Consulting Firm $($LO $9-2,9-5,9-7)$

Toronto Business Associates, a division of Maple Leaf Services Corporation, offers management and computer consulting services to

clients throughout Canada and the northwestern United States. The division specializes in website development and other Internet

applications. The corporate management at Maple Leaf Services is pleased with the performance of Toronto Business Associates for

the first nine months of the current year and has recommended that the division manager, Richard Wu$,$ submit a revised forecast for

the remaining quarter, as the division has exceeded the annual plan year$-$to$-$date by $20$ percent of operating income. An unexpected

increase in billed$-$hour volume over the original plan is the main reason for this increase in income. The original operating budget for

the first three quarters for Toronto Business Associates follows.

Wu will reflect the following information in his revised forecast for the fourth quarter.

Toronto Business Associates currently has $25$ consultants on staff, $10$ for management consulting and $15$ for computer systems

consulting. Three additional management consultants have been hired to start work at the beginning of the fourth quarter in order

to meet the increased client demand.

The hourly billing rate for consulting revenue will remain at $$90$ per hour for each management consultant and $$75$ per hour for

each computer consultant. However, due to the favorable increase in billing hour volume when compared to the plan, the hours for

each consultant will be increased by $50$ hours per quarter.

The budgeted annual salaries and actual annual salaries, paid monthly, are the same: $$58,000$ for a management consultant and

$$54,000$ for a computer consultant. Corporate management has approved a merit increase of $10$ percent at the beginning of the

fourth quarter for all $25$ existing consultants, while the new consultants will be compensated at the planned rate.

The planned salary expense includes a provision for employee fringe benefits amounting to $30$ percent of the annual salaries.

However, the improvement of some corporatewide employee programs will increase the fringe benefits to $40$ percent.

The original plan assumes a fixed hourly rate for travel and other related expenses for each billing hour of consulting. These are

expenses that are not reimbursed by the client, and the previously determined hourly rate has proven to be adequate to cover

these costs.

Other revenue is derived from temporary rentals and interest income and remains unchanged for the fourth quarter.

General and administrative expenses have been favorable at $7$ percent below the plan; this $7$ percent savings on fourth quarter

expenses will be reflected in the revised plan.

Depreciation of office equipment and personal computers will stay constant at the projected straight$-$line rate.

Due to the favorable experience for the first three quarters and the division's increased ability to absorb costs, the corporate

management at Maple Leaf Services has increased the corporate expense allocation by $50$ percent.

Required:

Prepare a revised operating budget for the fourth quarter for Toronto Business Associates that Richard Wu will present to corporate

management.

Which of the following circumstances would NOT require an organization to prepare a revised operating budget?

Complete this question by entering your answers in the tabs below.

Prepare a revised operating budget for the fourth quarter for Toronto Business Associates that Richard Wu will present to

corporate management.