Paton Consultants is a consulting firm that engagesclients in regards to their transfer pricing. Thefollowing Table presents the most recent period'sbudget and actual performance for that period.Revenue is based on hours billed to clients.RevenueDirectLaborFixedOverheadProfitBudget$1,000,000$800,000$100,000$100,000Actual$1,200,000$990,000$100,220$109,7801.Assume that Paton's actual hourly rate that theybilled clients at was no different than the plannedhourly rate (thus, the difference between budgetedrevenue and actual is solely because Paton wasable to bill more hours). Should Paton be satisfiedwith the variance in Direct Labor? Why or why not? 2.Name two reasons why direct labor expensemight be different than expected, even afteradjusting for the increase in hours billed.3.Paton's CEO is pleased with the increase inbillable hours booked over actual and has decidedto give her employees a bonus. Give at least onereason why this might be a good idea, and at leasttwo reasons why this might be counterproductive.4.While Paton's CEO is happy with the performance,she's worried that she didn't set an ambitiousenough budget from the get-go. She's thinking ofincreasing the revenue projection for the nextperiod. Give at least one reason why this might be agood idea and at least two reasons why this mightbe counterproductive.

The effectiveness with which a business uses its labour to manufacture or provide services is…

Answered: 3.Paton's CEO is pleased with the…

3.Paton's CEO is pleased with the increase in billable hours booked over actual and has decided to give her employees a bonus. Give at least one oson why this might bo good idea and at least

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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14 Howard Cooper, the president of Finch Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 3. Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 36,000 hours of services in Year 3. Required Required Required A B с $ b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Finch charges customers $80 per hour, the firm can achieve 45,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same…
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Howard Cooper, the president of Walton Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost Expected fixed costs. Facility maintenance Selling, general, and administrative $ 65.00 30.00 5.65 3.40 $ 316,000 120,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 29,000 hours of services in Year 1. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Walton charges customers $60 per hour, the firm can achieve 34,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same…
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Exercises on Life Cycle Costing XYZ Corporation GCorporation had the dhaice to develop either CELL PHONE 101 or CELL PHONE 999, both cell phones have the same fundionality. CELL PHONE 101 is designated for a broad range of applications and is robustly implemented. CELL PHONE 999's design and implementation is "rough and ready" meaning the basic fundionality is made available quickly and extra resouræs are spent in marketing and customizing the product for specialized customer segments. The budgeted amounts for CELL PHONE 101 and CELL PHONE 999 over a s-year product life cyde are: CELL PHONE 101 CELL PHONE 999 Years 1 & 2 R&D Design Costs 240,000.00 160,000.00 150,000.00 75,000.00 Variable Costs Per Package 25.00 Variable Costs Per Package 25.00 Years 3 to 6 Total Fixed Costs Total Fixed Costs 100,000.00 Production Costs Marketing Costs 100,000.00 70,000.00 50, 000.00 24.00 90,000.00 80,000.00 40.00 25.00 Distribuion 16.00 Costs Gustomer 100,000.00 80,000.00 30.00 50.00 Service Costs…