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    Flexible Budgets Software Associates Harvard Business Review

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    Software Associates
    Harvard Business Review
    by Kaplan

    Report to Richard Norton, CEO of Software Associates

    1. Prepare a variance analysis report based on the information in Exhibit 1. Would this be sufficient to explain the profit explain the profit shortfall to Norton at the 8 am meeting? ( see highlighted answers below exhibit 1)
    2. Prepare a variance analysis report based on the information in Exhibit 2.
    3. Prepare a spending and volume variance analysis of operating expenses based on the additional information supplied in Exhibit 3.
    4. Prepare an analysis of the revenue change, separating the volume effect (increase in number of consultants) from the productivity effect (billing percentage).
    5. Prepare an analysis of actual versus budgeted revenues, consultant expenses and margin using the additional information supplied in Exhibit 4.

    Exhibit 1 Software Associations Income Statement , Q2, 2000

    Actual Budget
    Revenues $3,264,000 3,231,900 ( F)
    Expenses $2,967,610 $2,625,550 ( U)
    Operating Profit $296,390 $606,350 ( U)
    Profit Percentage 9.1% 18.8%
    F= Favorable, U = Unfavorable
    Description | Favorable / Unfavorable |
    Revenues | Favorable |
    Expenses | UnFavorable |
    Operating Profit | UnFavorable |
    this exhibit requires the following
    a) Billing hours
    b) Billing rate
    Exhibit 2 Budget and Actual Income Statement: Quarter 2 2000
    Actual Budget
    Revenues $3,264,000 3,231,900
    Less:
    Consultants' salaries and fringes $2,029,050 $1,748,250
    Operating Expenses $938,560 $877,300
    Total Expenses $2,967,610 $2,625,550
    Operating Profit $296,390 $606,350
    Profit% 9.1% 18.8%

    Operating Statistics
    Number of consultants (FTE) 113 105
    Hours supplied 50,850 47,250
    Hours Billed 39,000 35,910
    Average billing rate $83.69 $90.00

    Exhibit 3 Expense Items: Budget Q2, 2000

    Actual Budget % Variable
    Advertising and promotion 22,100 15,100 0%
    Administrative and support staff 225,000 191,250 80
    Information systems 126,200 120,000 80
    Depreciation 23,400 22,700 0
    Dues and subscriptions 11,800 13,100 80
    Education and training 36,200 38,900 80
    Equipment leases 23,500 22,440 25
    Insurance 33,600 32,200 0
    Professional services 39,500 34,700 0
    Office expenses 42,100 36,550 100
    Office supplies 86,200 89,600 80
    Postage 27,300 24,700 80
    Rent-real estate 117,260 117,260 0
    Telephone 40,000 38,500 100
    Travel and entertainment 57,800 56,300 100
    Utilities 26,600 24,000 25
    Total 938,560 877,300

    Exhibit 4 Line of Business Budget and Actual Operating Statistics: Q2 2000
    Contract Solutions Total
    Actual
    Number of consultants (FTE) 64 49 113
    Billed hours 24,000 15,000 39,000
    Billed Revenues 1,344,000 1,920,000 3,264,000

    Hours supplied 28,800 22,050 50,850
    Consultant Costs 1,036,800 992,250 2,029,050

    Budget
    Number of consultants (FTE) 56 49 105
    Billed Hours 20,160 15,750 35,910
    Billed Revenue 1,088,640 2,143,260 3,231,900

    Hours Supplied 25,200 22,050 47,250
    Consultant costs 756,000 992,250 1,748,250

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    https://brainmass.com/business/management-information-systems/flexible-budgets-software-associates-harvard-business-review-565794

    Solution Preview

    I created a tab for each exhibit in Excel (attached) and created a "report" for each. I added ...

    Solution Summary

    I created a tab for each exhibit and created a "report" for each. I added some analysis and thoughts on each that you could use in your write up. You can cut and paste the exhibits into your report. Your response includes four exhibits with commentary and five ideas for additional analysis if more data was available. A hypothesis about market share is shared.

    $2.19

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