Problem 8-18A Flexible budget planning LO 8-1 Curtis Salter, the president of Ka
ID: 2401022 • Letter: P
Question
Problem 8-18A Flexible budget planning LO 8-1 Curtis Salter, the president of Kasimer 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 firnm charges its customers. The following basic data pertain to fiscal year 2015 Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost S 90.00 39.00 6.40 3.40 Expected fxed costs Facility maintenance Selling, goneral, and administrative $517,000 45,000 Required Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 42,000 hours of services in 2015 KASIMER SERVICES Pro Forma Income Statement Master Budget Variable costs: Fixed costs:Explanation / Answer
a. KASIMER COMPUTER SERVICES Pro Forma Income Statement Master Budget Services revenue (42000 x $90) 3780000 Variable costs: Labor cost (42000 x $39) 1638000 Overhead cost (42000 x $6.40) 268800 Selling, general, and administrative 142800 Contribution margin $ 1730400 Fixed costs: Facility maintenance 517000 Selling, general, and administrative (42000 x $3.40) 145000 Net income $ 1068400 b. KASIMER COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Services revenue (50000 x $85) 4250000 Variable costs: Labor cost (50000 x $39) 1950000 Overhead cost (50000 x $6.40) 320000 Selling, general, and administrative (50000 x $3.40) 170000 Contribution margin $ 1810000 Fixed costs: Facility maintenance 517000 Selling, general, and administrative 145000 Net income $ 1148000 c. KASIMER COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Services revenue (36000 x $95) 3420000 Variable costs: Labor cost (36000 x $39) 1404000 Overhead cost (36000 x $6.40) 230400 Selling, general, and administrative (36000 x $3.40) 122400 Contribution margin $ 1663200 Fixed costs: Facility maintenance 517000 Selling, general, and administrative 145000 Net income $ 1001200