# Flexible Budgets and Variance Analysis

Sinclair and Reid, an accounting firm, has budgeted \$200 000 in fixed expenses per month for the tax department. It has also budgeted variable costs of \$10 per tax return prepared for supplies, \$70 per return for labour, and \$20 per return for computer time. The firm expects revenue from tax return preparation to be \$600 000, based on 4000 tax returns at \$300 each. During the current month, 3700 tax returns were actually prepared, at an average fee of \$294 each. Actual variable costs were \$18 200 for supplies, \$130 000 for labour, and \$36 000 for computer time. Actual fixed costs were \$200 000.

1. Prepare a flexible budget for the tax department of Sinclair and Reid for the current month.

2. Compute the flexible budget variance for Sinclair and Reid.

Flexible budget and variance analysis

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