Question

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 $1,030 per hour and staff at a rate of  $515 per hour. Managers are paid $355 per hour worked (including nonbillable time) and staff are paid $190 per hour. The current plan calls for managers to bill 1,330 hours in May and 880 hours in June. Staff are expected to bill 6,660 hours in May and 4,760 hours in June. Managers will work a total of 2,660 hours in both months and staff will work a total of 9,860 hours in both months.

Other monthly costs (all fixed) are $556,500 SG&A, $231,500 in depreciation, and $356,500 in marketing.

Required:

Prepare a budgeted income statement for Executive Solutions for May and June (separately).

EXECUTIVE SOLUTIONS Budgeted Income Statement May June Revenues: Managers Staff Total revenue Expenses: Manager compensation Staff compensation Total compensation SG&A Depreciation Marketing Total expenses Income (Loss)

Answer 1

EXECUTIVE SOLUTIONS
Budgeted income statement
			May	June
Revenues:
managers			1369900	906400
staff			3429900	2451400
Total revenue			4799800	3357800
expenses:
manager compensation			944300	944300
staff compensation			1873400	1873400
Total compensation			2817700	2817700
SG&A			556500	556500
depreciation			231500	231500
marketing			356500	356500
Total expenses			3962200	3962200
Income (loss)			837600	-604400
Working notes
revenues
managers (1330hr*1030)			1369900
june (880*1030)			906400
staff
may (6660*515)			3429900
june (4760*515)			2451400
Manager compensation
may (2660*355)			944300
june (2660*355)			944300
staff compensation
may (9860*190)			1873400
june (9860*190)			1873400

Please give a thumbs up if it is helpful & let me know if any doubt