Variance Analysis for Services
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Variance Analysis Service Environment
Todd Judd separated from his wife Stella ,had filed for Divorced. As Part of the divorce, Todd realized that he would have to engaged in a legal battle with Stella since the couple owned several parcels
of property and had considerable investment, including a business Todd acquired from his father.Todd
spoke with several attorneys, explain his case and ask each for a estimate of the cost to represent him in the proceedings. Perry Schmidts,a practicing attorney ,provided Todd with the following estimate of cost if he were to represent Todd.$
Items Hours Billing rate Total Cost
Attorney hours, planning 150 $ 185 per hour $27,750
and court time
Admin .and clerical support 60 75 per hour 4,500
witness fee n/a n/a 1,500
Court cost n/a n/a 500
Total $34,000
Todd hired Perry Based on the estimates. In the course of the trial several unforeseen issues arose,
continuation was granted, and the proceeding dragged on for 18 months. At the end of the trail. Perry provided with a bill totaling $42,840. The following billing detail were also provided
Item Hours Total cost
Attorney hours , planning and 187 $34,595
court time
Admin, and clerical support 52 3.640
Witness fee n/a 2,750
Deposition fees 1.255
Court costs n/a 600
Total $42,840
Perry offered the following explanation for the difference between the estimates and final billings
1. Continuation unforeseen issues resulted in extra attorney hours.
2 Deposition fee were not anticipated in the original quote.
3.Although the number of filling were exactly as anticipated, Perry was not aware that the court had
increase its filling resulting in a extra $100.
Required
A. Calculate the average rate per hour that Todd was build for attorney time and Clerical assistance.
B. Base on the original budget estimate was the labor efficiency variance for attorney time favorable or unfavorable.
C. Is the court filing fee variance related to volume? Explain your answer.
D. Calculate the labor rate,effinciency,and total variance associated with clerical supprt
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Solution Summary
Todd Judd, separated from his wife Stella, had filed for divorce. As part of the divorce, Todd realized that he would have to engage in a legal battle with Stella since the couple owned several parcels of property and had considerable investment, including a business Todd acquired from his father. Todd spoke with several attorneys, explained his case and asked each for a estimate of the cost to represent him in the proceedings. Perry Schmidts, a practicing attorney, provided Todd with the following estimate of cost if he were to represent Todd.
Items Hours Billing rate Total Cost
Attorney hours, planning 150 $ 185 per hour $27,750
and court time
Admin.and clerical support 60 75 per hour 4,500
witness fee n/a n/a 1,500
Court cost n/a n/a 500
Total $34,000
Todd hired Perry based on the estimates. In the course of the trial several unforeseen issues arose, a continuation was granted, and the proceeding dragged on for 18 months. At the end of the trail, Perry provided with a bill totaling $42,840. The following billing detail was also provided
Item Hours Total cost
Attorney hours, planning and 187 $34,595
court time
Admin. and clerical support 52 3,640
Witness fee n/a 2,750
Deposition fees 1,255
Court costs n/a 600
Total $42,840
Perry offered the following explanation for the difference between the estimates and final billings:
1. Continuation unforeseen issues resulted in extra attorney hours.
2 The deposition fees were not anticipated in the original quote.
3. Although the number of filings were exactly as anticipated, Perry was not aware that the court had increased its filing fees, resulting in a extra $100.
Required
A. Calculate the average rate per hour that Todd was build for attorney time and clerical assistance.
B. Based on the original budget estimate was the labor efficiency variance for attorney time favorable or unfavorable?
C. Is the court filing fee variance related to volume? Explain your answer.
D. Calculate the labor rate, efficiency, and total variance associated with clerical support.
Solution Preview
A. Calculate the average rate per hour that Todd was billed for attorney time and clerical assistance.
Category Total Cost Hours Rate/Hour
Attorney hours, planning and $34,595 187 $185.00
court time
Administrative and clerical support $ 3,640 52 $ 70.00
B. Based on the original budget estimate was the labor efficiency variance for attorney time favorable or unfavorable?
Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate)
Labor efficiency variance ...
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