Howard Cooper, the president of Fanning Computer Services, needs your help. He wonders about the potential effect 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 $ 86.00 32.00 Selling, general, and administrative cost 6.90 3.90 Facility maintenance selling, general, and administrative $ 515,000 147,000 Expected fixed costs Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in Year 3. 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 Fanning charges customers $81 per hour, the firm can achieve 48,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $91 per hour, the number of service hours will decline to 35,000. Prepare a flexible budget using the new assumption. Complete this question by entering your answers in the tabs below. Required A Required B Required C 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 Fanning charges customers $81 per hour, the firm can achieve 48,000 hours of services. Prepare a flexible budget using the consultant's assumption. FANNING COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Vanable costs Fixed costs
Howard Cooper, the president of Fanning Computer Services, needs your help. He wonders about the potential effect 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 $ 86.00 32.00 Selling, general, and administrative cost 6.90 3.90 Facility maintenance selling, general, and administrative $ 515,000 147,000 Expected fixed costs Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in Year 3. 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 Fanning charges customers $81 per hour, the firm can achieve 48,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $91 per hour, the number of service hours will decline to 35,000. Prepare a flexible budget using the new assumption. Complete this question by entering your answers in the tabs below. Required A Required B Required C 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 Fanning charges customers $81 per hour, the firm can achieve 48,000 hours of services. Prepare a flexible budget using the consultant's assumption. FANNING COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Vanable costs Fixed costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Howard Cooper, the president of Fanning Computer Services, needs your help. He wonders about the potential effect
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
$ 86.00
32.00
Selling, general, and administrative cost
6.90
3.90
Facility maintenance
selling, general, and administrative
$ 515,000
147,000
Expected fixed costs
Required:
a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide
39,000 hours of services in Year 3.
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 Fanning charges customers $81 per hour, the firm can
achieve 48,000 hours of services. Prepare a flexible budget using the consultant's assumption.
c. The same consultant also suggests that if the firm raises its rate to $91 per hour, the number of service hours will
decline to 35,000. Prepare a flexible budget using the new assumption.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
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 Fanning charges customers $81 per hour, the firm can achieve 48,000 hours
of services. Prepare a flexible budget using the consultant's assumption.
FANNING COMPUTER SERVICES
Pro Forma Income Statement
Flexible Budget
Vanable costs
Fixed costs
<Required A
S
0
S
0
Required C >
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