Using the Master budget and schedule 2, evaluate and justify whether management should decide to add the Business advisory department. Add relevant graphs using the information from the master budget and schedule 2.

BUDGET 2020 2020 Master Budget for T&K Accounting Services Taxation Bookkeeping Advisory Total Billable hours 3,410 2,363 3,000 8,773 290 273 126 689 Chargeout rate per billable hour 421 Professional labour rate per hour 160 62 200 3,600 4,092 2,835 10,527 Professional labour hours 930,930 297,675 870,000 2,098,605 Revenue Professional labour costs 653,288 175,203 720,000 1,548,491 Gross margin 277,642 122,472 150,000 550,114 Office staff wages 53,333 53,333 53,333 160,000 19,500 19,500 19,500 58,500 Rent & Utilities Printing & stationary 7,000 7,000 7,000 21,000 13,200 13,200 13,200 39,600 IT Support Advertising 7,333 7,333 7,333 22,000 3,733 3,733 3,733 11,200 Depreciation Client entertainment costs 23,273 7.442 21,750 52,465 Total Support costs 127,373 111,542 125,850 364,765 Budgeted Profit before tax 24,150 185,349 150,269 10,930 Schedule 2 Budget Scenario Analysis Business Advisory Department Business Advisory Business Advisory Business Advisory Business Advisory Net/Business Advisory Net Support Costs Business Advisory Business Advisory Business Advisory Professional What-if-scenario Support Costs Profit % Change from - Billable hours Gross Margin Labour hours labour costs Profit Revenue Master budget Fixed Costs Variable Costs Original budget 0% 150,000 3,000 870.000 3,600 720,000 104,100 21,750 24,150 10% reduction in billable hours 104,100 2,700 783,000 3,240 648,000 135,000 19,575 11,325 -53% 15% reduction in billable hours -80% 3,060 612.000 18,488 4,913 2,550 739,500 127,500 104,100 25% reduction in billable hours 104,100 16,313 2,250 652,500 2,700 540,000 112,500 7,913 -133% BUDGET 2020 2020 Master Budget for T&K Accounting Services Taxation Bookkeeping Advisory Total Billable hours 3,410 2,363 3,000 8,773 290 273 126 689 Chargeout rate per billable hour 421 Professional labour rate per hour 160 62 200 3,600 4,092 2,835 10,527 Professional labour hours 930,930 297,675 870,000 2,098,605 Revenue Professional labour costs 653,288 175,203 720,000 1,548,491 Gross margin 277,642 122,472 150,000 550,114 Office staff wages 53,333 53,333 53,333 160,000 19,500 19,500 19,500 58,500 Rent & Utilities Printing & stationary 7,000 7,000 7,000 21,000 13,200 13,200 13,200 39,600 IT Support Advertising 7,333 7,333 7,333 22,000 3,733 3,733 3,733 11,200 Depreciation Client entertainment costs 23,273 7.442 21,750 52,465 Total Support costs 127,373 111,542 125,850 364,765 Budgeted Profit before tax 24,150 185,349 150,269 10,930 Schedule 2 Budget Scenario Analysis Business Advisory Department Business Advisory Business Advisory Business Advisory Business Advisory Net/Business Advisory Net Support Costs Business Advisory Business Advisory Business Advisory Professional What-if-scenario Support Costs Profit % Change from - Billable hours Gross Margin Labour hours labour costs Profit Revenue Master budget Fixed Costs Variable Costs Original budget 0% 150,000 3,000 870.000 3,600 720,000 104,100 21,750 24,150 10% reduction in billable hours 104,100 2,700 783,000 3,240 648,000 135,000 19,575 11,325 -53% 15% reduction in billable hours -80% 3,060 612.000 18,488 4,913 2,550 739,500 127,500 104,100 25% reduction in billable hours 104,100 16,313 2,250 652,500 2,700 540,000 112,500 7,913 -133%