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 consultant also suggests that if the firm raises its rate to $70 per hour, the number of service hours will decline to 24,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare the pro forma income statement that would appear in the master budget if the fir of services in Year 1. WALTON COMPUTER SERVICES Pro Forma Income Statement Services revenue Variable costs: Master Budget
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 consultant also suggests that if the firm raises its rate to $70 per hour, the number of service hours will decline to 24,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare the pro forma income statement that would appear in the master budget if the fir of services in Year 1. WALTON COMPUTER SERVICES Pro Forma Income Statement Services revenue Variable costs: Master Budget
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text: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 consultant also suggests that if the firm raises its rate to $70 per hour,
the number of service hours will decline to 24,000. Prepare a flexible budget
using the new assumption.
d. Which pricing strategy should be adopted?
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Required D
Prepare the pro forma income statement that would appear in the master budget if the fir
of services in Year 1.
WALTON COMPUTER SERVICES
Pro Forma Income Statement
Services revenue
Variable costs:
Master Budget
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