Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 28

Flexible Budgeting, Service Organization

Lowe&Rent is a law firm that specializes in probate work. Last year, the firm billed more hours than expected, but, as the following data show, profits were lower than anticipated.

	Reported Income Statement	MasterBudget
Billable hoursa	6,900	6,000
Revenue	$825,000	$750,000
Professional salaries (all variable)	465,000	375,000
Other variable costs (e.g., supplies, computer services)	108,000	102,000
Fixed costs	174,000	180,000
Profit	$ 78,000	$ 93,000

Required

Prepare a flexible budget for Lowe&Rent. Use billable hours as the measure of output (that is, units produced).