Q1.

Variance Analysis Report based on Exhibit 1 In order to perform a variance analysis report Jenkins calculated the actual revenues and expenses (exhibit 1) and found the difference which was $296,390 in profits. The budgeted values of revenues and expenses were found and the budgeted profits is found to be $606,350. The variance amount in operating Profit is $606,350- $296,390 =$309,960 under budget. Also, the variance amount for revenues (actual-budgeted) is $3264000$3231900=$32,100(F). This number is favourable due to the fact that they made more than what they had budgeted for. On the other hand, the variance amount for expenses(actual-budgeted) is $2967610-$2625550= $342,060(A), which was adverse because they spent far more than what they had budgeted for. This information would not be sufficient in order to explain to Norton why their profit percentage is nearly half of what they budgeted. This variance analysis report only shows the raw numbers and not any details to why they spent more on expenses than what they budgeted. Jenkins would have a difficult time explaining details to why they went over budget. She would need to show him a detailed expense report of the budgeted items and the actual amount they spent on the items. Then she would have to clearly define which items went over budget and why. This data does not give us any further information as it does not give us the details of billing hours and billing rates. So for exhibit 1 the details required are: a) Billing hours b) Billing rate This variance analysis report would not help Jenkins in the 8 am meeting she has and would need to provide more information.

Q2. Variance analysis based on Exhibit 2. S.no 1 2 3 4 5 6 Items Revenues Less: Consultant Salaries & fringes Operating expense Total expense(2+3) Operating Profit(14) Profit % Actual 3,264,000 2,029,050 938,560 2,967,610 2,96,390 9.1% Budgeted 3,231,900 1,748,250 877,300 2,625,550 6,06,350 18.8% Variance 32,100(F) 2,80,800(A) 61,260(A) 3,42,060(A) 3,09,960(A) 9.7 % (A)

Operating statistics No of consultants Hrs supplied Hrs billed Avg billing rate Hrs/consultant

Actual 113 50,850 39,000 83.69 450

Budgeted 105 47,250 35,910 90.00 450

Variance 8 3600 3090 6.31

Key observation: Actual billing rate has decreased, though no. of hours billed has increased. We can also calculate 1. Billing variance (equivalent to price variance) = ($ 83.69 - $ 90.00) *39,000 = $ 246,090 (A) 2. Quantity Variance = (39,000 35910) * 90 = $278100 (F)

Q3. Spending & volume variances based on exhibit 3

Actual (in $) Items Advertising and promotion Administrative and suppor t staff Information systems Depreciation Dues and subscriptions Education and training Equipment leases Insurance Fixed 2210 0 4500 0 2524 0 2340 0 2360 7240 1762 5 3360 0 Varia ble 0 18000 0 10096 0 0 9440 28960 5875 0

Budgeted (in $) Fixe d 1510 0 3825 0 2400 0 2270 0 2620 7780 1683 0 3220 0 Varia ble 0 15300 0 96000 0 10480 31120 5610 0

Professional services Office expense Office supplies Postage Rent - real estate Telephone Travel and entertainment Utilities Total Expense

3950 0 0 1724 0 5460 1172 60 0 0 1995 0 3759 75

0 42100 68960 21840 0 40000 57800 6650 56258 5

3470 0 0 1792 0 4940 1172 60 0 0 1800 0 3523 00

0 36550 71680 19760 0 38500 56300 6000 52500 0

Variable OH Spending Variance= ($ 562585 - $ 525000)= $ 37585(A) Fixed OH Volume Variance = ($ 375975 - $ 352300)= $ 23675(A)

Both Spending and Volume variance for the overhead expenses has gone beyond the budgeted amount as not only the variable expenses have increased but there is a considerable increase in the fixed expenses.