prepare a revised operating budget for the fourth quarter for Denver Design Associates that David Miller will present to corporate management.

The case - Denver Design Associates Denver Design Associates, a division of Rocky Mountain Services Corporation, offers management and computer design services to clients throughout Canada and the northwestern United States. The division specializes in Web site development and other Internet applications. The corporate management at Rocky Mountain Services is pleased with the performance of Denver Design Associates for the first nine months of the current year and has recommended that the division manager, David Miller, 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 Denver Design Associates follows. + Fit to page Page view A Read aloud Add notes DENVER DESIGN ASSOCIATES 2021 OPERATING BUDGET 1st quarter 2nd quarter 3rd quarter Total for first three quarters $ 843,750 $ 843,750 $ 843,750 $ 2,531,250 1,890,000 4,421,250 60,000 4,481,250 630,000 1,473,750 630,000 1,473,750 630,000 1,473,750 Revenue: Computer system design Management design Total fees Other revenue Total revenue Expenses: Designer salary expenses Travel and related expenses General and administrative expenses Depreciation expense Corporate expense allocation Total expenses 20,000 1,493,750 20,000 1,493,750 20,000 1,493,750 2,320,500 273,750 600.000 240,000 300,000 3,734,250 $ 747,000 773,500 91,250 773,500 91,250 773,500 91,250 Operating income 200,000 80,000 100,000 1,244,750 $ 249,000 200.000 80,000 100,000 1,244,750 $ 249,000 200,000 80,000 100,000 1,244,750 $ 249,000 ch Di o file:///C:/Users/12368/Downloads/3_Denver Design%20(4.pdf + Fit to page D Page view A Read aloud Add notes Miller will reflect the following Information in his revised forecast for the fourth quarter. Denver Design Associates currently has 25 designers on staff, 10 for management design and 15 for computer systems design. Three additional management designers 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 Design revenue will remain at $180 per hour for each management designer and $150 per hour for each computer designer. However, due to the favourable increase in billing hour volume when compared to the plan, the hours for each designer will be increased by 50 hours per quarter. The budgeted annual salaries and actual annual salaries, paid monthly, are the same: $100,000 for a management designer and $92,000 for a computer designer. Corporate management has approved a merit increase of 10 percent at the beginning of the fourth quarter for all 25 existing designers, while the new designers 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 corporate-wide employee programs will increase the fringe benefits to 40 percent. The original plan assumes a fixed hourly rate for travel and other related 4) ENG O e here to search (4).pd X file:///C:/Users/12368/Downloads/3_Denver_Design%20(4).pdf Add nc + Fit to page I Page view AV Read aloud The original plan assumes a fixed hourly rate for travel and other related expenses for each billing hour of Design. 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 favourable 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 favourable experience for the first three quarters and the division's increased ability to absorb costs, the corporate management at Rocky Mountain Services has increased the corporate expense allocation by 50 percent. 3 The case - Denver Design Associates Denver Design Associates, a division of Rocky Mountain Services Corporation, offers management and computer design services to clients throughout Canada and the northwestern United States. The division specializes in Web site development and other Internet applications. The corporate management at Rocky Mountain Services is pleased with the performance of Denver Design Associates for the first nine months of the current year and has recommended that the division manager, David Miller, 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 Denver Design Associates follows. + Fit to page Page view A Read aloud Add notes DENVER DESIGN ASSOCIATES 2021 OPERATING BUDGET 1st quarter 2nd quarter 3rd quarter Total for first three quarters $ 843,750 $ 843,750 $ 843,750 $ 2,531,250 1,890,000 4,421,250 60,000 4,481,250 630,000 1,473,750 630,000 1,473,750 630,000 1,473,750 Revenue: Computer system design Management design Total fees Other revenue Total revenue Expenses: Designer salary expenses Travel and related expenses General and administrative expenses Depreciation expense Corporate expense allocation Total expenses 20,000 1,493,750 20,000 1,493,750 20,000 1,493,750 2,320,500 273,750 600.000 240,000 300,000 3,734,250 $ 747,000 773,500 91,250 773,500 91,250 773,500 91,250 Operating income 200,000 80,000 100,000 1,244,750 $ 249,000 200.000 80,000 100,000 1,244,750 $ 249,000 200,000 80,000 100,000 1,244,750 $ 249,000 ch Di o file:///C:/Users/12368/Downloads/3_Denver Design%20(4.pdf + Fit to page D Page view A Read aloud Add notes Miller will reflect the following Information in his revised forecast for the fourth quarter. Denver Design Associates currently has 25 designers on staff, 10 for management design and 15 for computer systems design. Three additional management designers 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 Design revenue will remain at $180 per hour for each management designer and $150 per hour for each computer designer. However, due to the favourable increase in billing hour volume when compared to the plan, the hours for each designer will be increased by 50 hours per quarter. The budgeted annual salaries and actual annual salaries, paid monthly, are the same: $100,000 for a management designer and $92,000 for a computer designer. Corporate management has approved a merit increase of 10 percent at the beginning of the fourth quarter for all 25 existing designers, while the new designers 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 corporate-wide employee programs will increase the fringe benefits to 40 percent. The original plan assumes a fixed hourly rate for travel and other related 4) ENG O e here to search (4).pd X file:///C:/Users/12368/Downloads/3_Denver_Design%20(4).pdf Add nc + Fit to page I Page view AV Read aloud The original plan assumes a fixed hourly rate for travel and other related expenses for each billing hour of Design. 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 favourable 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 favourable experience for the first three quarters and the division's increased ability to absorb costs, the corporate management at Rocky Mountain Services has increased the corporate expense allocation by 50 percent. 3