Question

UWUR 1 Help Save & Exit Submit Check my work Executive Solutions is a strategy consulting firm. Other than the senior leadership (who manage the firm, but do not actively consult), the managers and staff are billed to clients on an hourly basis. The workload varies quite a bit from month to month requiring careful planning. Managers are billed to clients at a rate of $1,040 per hour and staff at a rate of $520 per hour. Managers are paid $365 per hour worked (including nonbillable time) and staff are paid $195 per hour. The current plan calls for managers to bill 1,340 hours in May and 890 hours in June. Staff are expected to bill 6,680 hours in May and 4,780 hours in June. Managers will work a total of 2,680 hours in both months and staff will work a total of 9,880 hours in both months. Other monthly costs (all fixed) are $557,000 SG&A $232,000 in depreciation, and $357,000 in marketing. Required: Prepare a budgeted income statement for Executive Solutions for May and June (separately). June EXECUTIVE SOLUTIONS Budgeted Income Statement May Revenues Managers Statt Total revenue Expenses Manager compensation Staff compensation < Prev 1 of 3 Next > ORONE & TOOBRO DO BE HORT 30 W LUBINIMI <> B. N

Answer 1

EXECUTIVE SOLUTIONS
Budgeted Income Statement
	May	June
Revenues:
Managers	$1,393,600	$925,600
Staff	$3,473,600	$2,485,600
Total revenue (i)	$4,867,200	$3,411,200
Expenses:
Manager compensation	$978,200	$978,200
Staff compensation	$1,926,600	$1,926,600
Total compensation (ii)	$2,904,800	$2,904,800
SG&A	$557,000	$557,000
Depreciation	$232,000	$232,000
Marketing	$357,000	$357,000
Total expenses (iii)	$1,146,000	$1,146,000
Income(Loss) (i)-(ii)-(iii)	$816,400	($639,600)

Calculations:

	May	June
Revenues:
Managers
[1,340 hours x $ 1,040]	$1,393,600
[890 hours x $1,040]		$925,600
Staff
[6,680 hours x $520]	$3,473,600
[4,780 hours x $520]		$2,485,600
Expenses:
Manager compensation	$978,200	$978,200
[2,680 hours x $365]
Staff compensation	$1,926,600	$1,926,600
[9,880 hours x $195]