90.2K

Verified Solution

Link Copied!

Howard Cooper, the president of Stuart 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 2019. $ Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative 86.00 38.00 6.80 3.40 $525.000 147,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 31,000 hours of services in 2019. 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 Stuart charges customers $81 per hour, the firm can achieve 40,000 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 $91 per hour, the number of service hours will decline to 27,000. Prepare a flexible budget using the new assumption Complete this question by entering your answers in the tabs below. Required A Required B Required C 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 Stuart charges customers $81 per hour, the firm can achieve 40,000 hours of services. Prepare a flexible budget using the consultant's assumption. STUART COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs: Fixed costs:

Answer & Explanation Solved by verified expert

See Answer