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Software Associates
Solution by Venky Nagar

Exhibit 1

Profit Statement

Actual Budget Variance

Revenue $ 3,264,000 $ 3,231,900 $ 32,100 F

Consultant expenses $ 2,029,050 $ 1,748,250 $ 280,800 U

Operating expenses $ 938,560 $ 877,300 $ 61,260 U

__________ __________ ________

Profit $ 296,390 $ 606,350 $ 309,960 U

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Revenue Variance Analysis (Exhibit 2)

Actual billing rate Budgeted billing rate

$3,264,000 = $83.6923/hr $3,231,900 = $90/hr

39,000 hrs 35,910 hrs

Actual Flex budget Budgeted revenue

AP x AQ SP x AQ SP x SQ

$83.6923 x 39,000 hrs $90 x 39,000 $90 x 35,910 hrs

hr hr

= $ 3,264,000 = $ 3,510,000 = $ 3,231,900

Variances $ 246,000 U $ 278,100 F

$ 32,100 F
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Revenue Billing Variance

Expected Billing % = 35,910 hrs = 76%

47,250 hrs

Actual Billing % = 39,000 hrs = 76.7%

50,850 hrs

SP x AQ SP x projected billing hrs SP x SQ

$90 x (39K hrs = 76.7% x 50,850) $90 x 76% x 50,850 hrs $90 x 35,910 hrs
hr
$3,510,000 = $ 3,478,140 $ 3,231,900

$31,860 F $246,240 F
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Exhibit 2

Cost analysis of consultant

Actual Budgeted

Wage rate
$ 2,029,050 = $39.90 $ 1,748,250 = $37
50,850 hr 47,250 hrs hr

Variance
AP x AQ SP x AQ SP x SQ
$ 2,029,050 = $39.90 x 50,850 $37 x 50,850 $37 x 47,250 hrs
hr
$ 1,881,450 $ 1,748,250

147,600 U $ 133,200 U

$ 280,800K U
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Exhibit 3

Cost analysis overhead (variable overhead only)

$877,300 OH Budgeted

$525,000 variable (computed based on % variable data)

$352,300 fixed
__________

Budget rate = 525,000 = $5,000/consultant

105 consultants

Actual rate Actual VOH = 938,560 – 352,300 = $5188.14/consultant. (I assume fixed OH remains same)
113 113

Variance

AP x AQ SP x AQ SP x SQ

$5188.14 x 113 5000 x 113 $5000 x 105

$568,260 $565,000 $525,000

$21,260 U $40K U

61,260 U
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Exhibit 4

Mix rates revenue

Contract Solutions

Actual $ 1,344,000 $ 1,920,000

24,000 hrs 15,000 hrs
= $56/hr = $128/hr

Budget $ 1,088,640 $ 2,143,260

20,160 hrs 15,750
= $54/hr = $136.08/hr

Budget 20,160 hrs = 56% 15,750 hrs = 44%

Mix 35,910 hrs 35,910 hrs
(hrs) ( = 20,160 + 15,750) ( = 20,160 + 15,750)
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Exhibit 4

Mix variance revenue

Solutions (total variance = $223,260U)

AP x AQ SP x AQ SP x ASQ SP x SQ

$128 x 15K hrs $136.08 x 15K hrs $136.08 x (44% x 39K = 17,160 hrs) $136.08 x 15,750 hrs

$ 1,920,000 $ 2,041,200 $ 2,335,132 $ 2,143,260

$121,200 U $293,932 U $191,872 F

102,060 U

Contract (total variance = $255,360F)

$56 x 24K $54 x 24K $54 x (56% x 39K = 21,840) hrs $54 x 20,160

$ 1,344,000 $ 1,296,000 $ 1,179,360 1,088,640

$48K F $116,640 F $90,720 F

$207,360 F

Total
$ 3,264,000 $ 3,337,200 $ 3,514,492 3,231,900
$73.2K U $177,292 U $282,592 F

$32,100 F
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Exhibit 4

Mix variance consultant cost

Contract Solutions

Actual $ 1,036,800 = $36 $992,250 = $45

28,800 hrs hr 22,050 hrs hr

Budgeted $756,000 = $30 $992,250 = $45

25,200 hrs hr 22,050 hrs hr

Budgeted 25,200 hrs = 53% 22,050 hrs = 47%

mix hrs 25,200 + 22,050 hrs 47,250 hrs
(= 47,250)
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Exhibit 4
Mix consultant cost variance

Solutions (total variance = 0)

AP x AQ SP x AQ SP x ASQ SP x SQ

$45 x 22,050 $45 x 22,050 $45 x (47% 50,850 = 23,899.5 hrs) $45 x 22,050 hrs

$992,250 $992,250 $ 1,075,477.5 $992,250

0 $83,227.5 F $83,227.5 U

Contract (total variance = $280,800U)

$36 x 28,800 $30 x 28,800 $30 x (53% x 50,850 = 26,950.5 hrs) $30 x 25,200 hrs

$ 1,036,800 $ 864,000 $ 808,515 $ 756,000

$172,800 U $55,485 U $52,515 U

$108,000 U

Total
$ 2,029,050 $ 1,856,250 $ 1,883,962.5 $ 1,748,250
$172,800 U $27,742.5 F $135,742.5 U

$280,800 U