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Howard Cooper, the president of Finch 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 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost. Selling, general, and administrative cost Expected fixed costs. Facility maintenance Selling, general, and administrative $ 62.00 29.00 5.55 3.40 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. $ 316,000 121,000 b. 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 Finch charges customers $57 per hour, the firm can achieve 31,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $67 per hour, the number of service hours will decline to 25,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Required A Complete this question by entering your answers in the tabs below. Required B Required C Required D

Howard Cooper, the president of Finch 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 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost. Selling, general, and administrative cost Expected fixed costs. Facility maintenance Selling, general, and administrative $ 62.00 29.00 5.55 3.40 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. $ 316,000 121,000 b. 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 Finch charges customers $57 per hour, the firm can achieve 31,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $67 per hour, the number of service hours will decline to 25,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Required A Complete this question by entering your answers in the tabs below. Required B Required C Required D

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 57P: Identifying Fixed, Variable, Mixed, and Step Costs Consider each of the following independent...
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Howard Cooper, the president of Finch 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 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost. Expected fixed costs Facility maintenance Selling, general, and administrative Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. b. 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 Finch charges customers $57 per hour, the firm can achieve 31,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $67 per hour, the number of service hours will decline to 25,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Required A $ 62.00 29.00 5.55 3.40 Complete this question by entering your answers in the tabs below. Required B $ 316,000 121,000 Required C Required D
Transcribed Image Text:Howard Cooper, the president of Finch 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 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost. Expected fixed costs Facility maintenance Selling, general, and administrative Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. b. 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 Finch charges customers $57 per hour, the firm can achieve 31,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if the firm raises its rate to $67 per hour, the number of service hours will decline to 25,000. Prepare a flexible budget using the new assumption. d. Which pricing strategy should be adopted? Required A $ 62.00 29.00 5.55 3.40 Complete this question by entering your answers in the tabs below. Required B $ 316,000 121,000 Required C Required D
Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. Variable costs: Fixed costs: FINCH COMPUTER SERVICES Pro Forma Income Statement Master Budget
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 28,000 hours of services in Year 1. Variable costs: Fixed costs: FINCH COMPUTER SERVICES Pro Forma Income Statement Master Budget
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