7-33 Static and flexible budgets, service sector. Student Finance (StuFi) is a start-up that aims to use the power of social communities to transform the student loan market. It connects participants through a dedicated lending pool, enabling current students to borrow from a school's alumni community. StuFi's rev- enue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and the student borrower for every loan originated on its platform. StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with that ambition. StuFi's budgeted and actual results for the third quarter of 2017 are presented below. 23456789 Home 8 Insert A 1 2 New loans originated 3 Average amount of loan Variable costs per loan: Professional labor Credit verification Federal documentation fees Courier services 9 Administrative costs (fixed) 10 Technology costs (fixed) Page Layout B Formulas Data Review C Static Budget 8.200 $145.000 $360 (8 hrs at $45 per hour) $100 $120 $50 $800,000 $1,300,000 D View E Actual Results 10.250 $162.000 $475 (9.5 hrs at $50 per hour) $100 $125 $54 $945,000 $1,415,000 1. Prepare StuFi's static budget of operating income for the third quarter of 2017. 2. Prepare an analysis of variances for the third quarter of 2017 along the lines of Exhibit 7-2; identify the sales volume and flexible budget variances for operating income. 3. Compute the professional labor price and efficiency variances for the third quarter of 2017. 4. What factors would you consider in evaluating the effectiveness of professional labor in the third quar- ter of 2017?
7-33 Static and flexible budgets, service sector. Student Finance (StuFi) is a start-up that aims to use the power of social communities to transform the student loan market. It connects participants through a dedicated lending pool, enabling current students to borrow from a school's alumni community. StuFi's rev- enue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and the student borrower for every loan originated on its platform. StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with that ambition. StuFi's budgeted and actual results for the third quarter of 2017 are presented below. 23456789 Home 8 Insert A 1 2 New loans originated 3 Average amount of loan Variable costs per loan: Professional labor Credit verification Federal documentation fees Courier services 9 Administrative costs (fixed) 10 Technology costs (fixed) Page Layout B Formulas Data Review C Static Budget 8.200 $145.000 $360 (8 hrs at $45 per hour) $100 $120 $50 $800,000 $1,300,000 D View E Actual Results 10.250 $162.000 $475 (9.5 hrs at $50 per hour) $100 $125 $54 $945,000 $1,415,000 1. Prepare StuFi's static budget of operating income for the third quarter of 2017. 2. Prepare an analysis of variances for the third quarter of 2017 along the lines of Exhibit 7-2; identify the sales volume and flexible budget variances for operating income. 3. Compute the professional labor price and efficiency variances for the third quarter of 2017. 4. What factors would you consider in evaluating the effectiveness of professional labor in the third quar- ter of 2017?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:7-33 Static and flexible budgets, service sector. Student Finance (StuFi) is a start-up that aims to use
the power of social communities to transform the student loan market. It connects participants through a
dedicated lending pool, enabling current students to borrow from a school's alumni community. StuFi's rev-
enue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and the student
borrower for every loan originated on its platform.
StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with
that ambition. Stufi's budgeted and actual results for the third quarter of 2017 are presented below.
1
2
Home
23456789
Insert
A
Page Layout
New loans originated
3 Average amount of loan
Variable costs per loan:
Professional labor
Credit verification
Federal documentation fees
Courier services
9 Administrative costs (fixed)
10 Technology costs (fixed)
B
Formulas
Static Budget
8,200
$145.000
Data
C
$120
$50
$360 (8 hrs at $45 per hour)
$100
$800,000
$1,300,000
Review
View
D
E
Actual Results
10.250
$162.000
$475 (9.5 hrs at $50 per hour)
$100
$125
$54
$945,000
$1,415,000
1. Prepare StuFi's static budget of operating income for the third quarter of 2017.
2. Prepare an analysis of variances for the third quarter of 2017 along the lines of Exhibit 7-2; identify the
sales volume and flexible budget variances for operating income.
3. Compute the professional labor price and efficiency variances for the third quarter of 2017.
4. What factors would you consider in evaluating the effectiveness of professional labor in the third quar-
ter of 2017?
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