Question:
Flexible Budgeting, Service Organization
Lowe & Rent is a law firm that specializes in probate work. Last year, the firm billed more hours than expected, but, as the following data show, profits were lower than anticipated.
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Reported Income
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Master
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|
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Statement
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Budget
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Billable hoursa
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6,900
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6,000
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Revenue
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$825,000
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$750,000
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Professional salaries (all variable)
|
465,000
|
375,000
|
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Other variable costs (e.g., supplies, computer services)
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108,000
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102,000
|
|
Fixed costs
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174,000
|
180,000
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Profit
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$ 78,000
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$ 93,000
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Required
Prepare a flexible budget for Lowe & Rent. Use billable hours as the measure of output (that is, units produced).