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Howard Cooper, the president of Thornton 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 $ 82.00 39.00 6.20 4.09 $518,000 147,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 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, Of Thornton charges customers $77 per hour, the firm can achieve 44,000 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 $87 per hour, the number of service hours will decline to 34,000. Prepare a flexible budget using the new assumption 3 Homework Saved . Required A Required B Required Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 39,000 hours of services in Year 1. THORNTON COMPUTER SERVICES Pro Forma Income Statement Master Budget Variable costs 7 $ 0 Fixed costs Required B > A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm car achieve. According to the consultant's analysis, if Thornton charges customers $77 per hour, the firm can achieve 44,000 hours of services. Prepare a flexible budget using the consultant's assumption. THORNTON COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs Fixed costs 0 Required A Required B Required c The same consultant also suggests that if the firm raises its rate to $87 per hour, the number of service hours will decline to 24,000. Prepare a flexible budget using the new assumption. THORNTON COMPUTER SERVICES Pro Forma Income Statement Flexible Budget Variable costs $ 0 Fbxed costs

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