What is the advantage of using Flexible Budget to evaluate the firm$’$s performance as opposed to Static Budget? Explain.

Explain the process of creating a Flexible Budget for the company.

Calculate the total static budget revenue variance, flexible budget revenue variance, and sales volume variance. Show your calculations.

Calculate variable costs variance. Show your calculations.

 

Law Services Inc. provides a variety of legal services to its clients. The firm's attorneys each have the authority to negotiate billing rates with their clients. Law Services wants to manage its operations more effectively, and established a budget at the beginning of last year. The budget included total hours billed, amount billed per hour, and variable expense per hour. Unfortunately, the firm failed to meet its budgeted goals for last year. The results are shown below. Total hours billed Amount billed/hour Actual Budget 5,700 6,000 $275 $325 The budgeted variable expense per hour is $50, and the actual total variable expense was $285,000. There is disagreement among the attorneys over the reasons that the firm failed to meet its budgeted goals.