Howard Cooper, the president of Campbell 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 3. Standard rate and variable costs Service rate per hour $ 85.00 Labor cost 37.00 7.10 3.80 Overhead cost Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative $522,000 142,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 45,000 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 Campbell charges customers $80 per hour, the firm can achieve 50,000 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 $90 per hour, the number of service hours will decline to 38,000. Prepare a flexible budget using the new assumption.
Howard Cooper, the president of Campbell 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 3. Standard rate and variable costs Service rate per hour $ 85.00 Labor cost 37.00 7.10 3.80 Overhead cost Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative $522,000 142,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 45,000 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 Campbell charges customers $80 per hour, the firm can achieve 50,000 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 $90 per hour, the number of service hours will decline to 38,000. Prepare a flexible budget using the new assumption.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 57P: Identifying Fixed, Variable, Mixed, and Step Costs Consider each of the following independent...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Howard Cooper, the president of Campbell 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 3.
Standard rate and variable costs
Service rate per hour
$
85.00
Labor cost
37.00
Overhead cost
7.10
Selling, general, and administrative cost
Expected fixed costs
Facility maintenance
Selling, general, and administrative
3.80
$522,000
142,000
Required:
a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 45,000 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 Campbell charges customers $80 per hour, the firm can achieve 50,000 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 $90 per hour, the number of service hours will decline to 38,000.
Prepare a flexible budget using the new assumption.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 45,000 hours
of services in Year 3.
CAMPBELL COMPUTER SERVICES
Pro Forma Income Statement
Master Budget
Services revenue
Variable costs:
Labor cost
Overhead cost
Selling, general, and administrative costs
Contribution margin
$
Fixed costs:
Facility maintenance
Selling, general, and administrative costs
Net income
$
< Required A
Required B
>
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