Question

Howard Cooper, the president of Solomon Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal year 2019: Standard rate and variable costs Service rate per hour Labor cost overhead cost Selling, general, and administrative cost $ 85.00 37.00 6.40 4.10 Expected fixed costs Facility maintenance Selling, general, and administrative $516,000 142,000 Required a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 33,000 hours of b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can services in 2019. $80 per hour, the firm can achieve 39,000 hours of achieve. According to the consultant's analysis, if Solomon charges customers services. Prepare a flexible budget using the consultant's assumption. The same consultant also suggests that if the firm raises its rate to $90 per hour, the number of service hours ill decline to 31,000 Prepare a flexible budget using the new assumption. Complete this question by entering your answers in the tabs below Required ARequired B Required C Prepare the pro forma income statement that would appear in the master budget if the firm e xpects to provide 33,000 hours Complete this question by entering your answers in the tabs below Required ARequired B Required C ma er budget "the firm expects to provide 33,000 hours m incom tato me e of services in 2019 SOLOMON COMPUTER SERVICES Pro Forma Income Statement Required B Complete this question by entering your answers in the tabs below. Required A Required B Required C A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Solomon charges customers $80 per hour, the firm can achieve 39,000 ours of services. Prepare a flexible budget using the consultant's assumption... SOLOMON COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Fixed costs Required A Complete this question by entering your answers in the tabs below Required A Required BRequired C The same consultant also suggests that if the firm raises its rate to $90 per hour, the number of service hours will decline to 31,000. Prepare a flexible budget using the new assumption.... SOLOMON COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs Fixed costs

Answer 1

	Proforma Income statement
	Master budget
1-	service revenue	33000*85	2805000
	variable cost
	labor cost	33000*37	1221000
	overhead cost	33000*6.40	211200
	selling and administrative cost	33000*4.1	135300
	total variable cost		1567500
	fixed cost
	facility maintenance		516000
	selling general and administrative		142000
	total fixed cost		658000
	net operating income		579500
2-	Proforma Income statement
	Flexible budget at 39000 Units
	service revenue	39000*80	3120000
	variable cost
	labor cost	39000*37	1443000
	overhead cost	39000*6.4	249600
	selling and administrative cost	39000*4.1	159900
	total variable cost		1852500
	fixed cost
	facility maintenance		516000
	selling general and administrative		142000
	total fixed cost		658000
	net operating income		609500
3-	Proforma Income statement
	Flexible budget at 31000 Units
	service revenue	31000*90	2790000
	variable cost
	labor cost	31000*37	1147000
	overhead cost	31000*6.4	198400
	selling and administrative cost	31000*4.1	127100
	total variable cost		1472500
	fixed cost
	facility maintenance		516000
	selling general and administrative		142000
	total fixed cost		658000
	net operating income		659500