Question 10: MEG Associates is reeling from a decline in profits because of competition. For its most recent year end, its controller has prepared following variance analysis and concluded that the company has done very well controlling its costs:

Budgeted Actual Variance

Variable costs:

Professional Labour $1,000,000 $ 940,000 $ 60,000 F

Travel 50,000 40,000 10,000 F

Supplies 100,000 90,000 10,000 F

Fixed Costs:

Professional Labour 400,000 405,000 (5,000) U

Facilities Cost 250,000 265,000 (15,000) U

Insurance 80,000 78,000 2,000 F

Totals $1,880,000 $1,818,000 $ 62,000 F

For the year MEG Associates projected (budgeted) that it would generate $2,000,000 in revenues; it actually generated $1,800,000. In this case sales $ are the activity. The company has consulted with you for help in understanding what is happening. You decide to address the following items.