Profit variance analysis in a service organization. Sell, Inc., is a marketing consulting firm that earns revenues by billing clients for hours worked. Last year, Sell, Inc.'s billable hours were up 10 percent from expected levels, but, as the following data show, profits were lower than anticipated.
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Actual Results
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Master Budget
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Billable Hoursa
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22,000 Hours
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20,000 Hours
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Revenue
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$2,300,000
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$2,000,000
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Production Costs:
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Professional Salaries (all variable)
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1,550,000
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1,200,000
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Other Variable Costs (e.g., supplies, certain computer services)
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250,000
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200,000
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General Administrative (all fixed)
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400,000
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400,000
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Corporate Client Profit
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$ 100,000
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$ 200,000
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Prepare a profit variance analysis for Sell, Inc.