Chat with AI
Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Profit Variance Analysis, Service Organization
Refer to the data in Exercise in 17-24. Prepare a profit variance analysis for Lowe&Rent like the one in Exhibit 16.5 of the previous chapter.
Verified
Step 1 of 2
L&R is a law firm which specialize in probate works. The profit variance analysis of L&R firm is as under:
The difference between actual cost and the flexible budget is the cost variance/ price variance as calculated in column (2) and (3).
The activity variance is the difference between flexible budget amount (budgeted cost on the basis of actual hours of 6,900 and the master budget based on 6,000 hours as calculated in column (5).
L&R Firm
Flexible Budget for 6,900 Billable Hours
| (1) | (2) | (3) | (4) | (5) | (6) | |
| Actual cost (based on 6,900 hrs) | Cost Variance | Price Variance | Flexible Budget (based on 6,900 hrs) | Sales Activity variance | Master Budget (based on 6,000 hrs) | |
| Revenues | $825,000 | - | $37,500U | $862,500 | $112,500F | $750,000 |
| Professional salaries(all variable) | $465,000 | $33,750U | - | $431,250 | $56,250U | $375,000 |
| Other variable cost | $108,000 | $9,300F | - | $117,300 | $15,300U | $102,000 |
| Fixed cost | $174,000 | $6,000F | - | $180,000 | - | $180,000 |
| Total cost | $747,000 | $18,450U | - | $728,550 | $71,550U | $657,000 |
| Profit | $78,000 | $55,950U | - | $133,950 | $40,950F | $93,000 |
The cost/price variance is the difference between actual cost and the flexible budget calculated on actual hours taken.
Step 2 of 2
Why don’t you like this exercise?
Other
