Question
Use the following information to answer questions 20-23. Paton Consultants is a consulting firm that engages clients in regards to their transfer pricing. The following
Use the following information to answer questions 20-23.
Paton Consultants is a consulting firm that engages clients in regards to their transfer pricing. The following Table presents the most recent period's budget and actual performance for that period. Revenue is based on hours billed to clients.
| Budget | Actual | |
| Revenue | $ 1,000,000 | $ 1,200,000 |
| Direct Labor | $ 800,000 | $ 990,000 |
| Fixed Overhead | $ 100,000 | $ 100,220 |
| Profit | $ 100,000 | $ 109,780 |
Assume that Paton's actual hourly rate that they billed clients at was no different than the planned hourly rate (thus, the difference between budgeted revenue and actual is solely because Paton was able to bill more hours). Should Paton be satisfied with the variance in Direct Labor? Why or why not?
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