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Prepare a spending and volume variance analysis of operating expenses based on the additional information supplied in Exhibit 3.

Exhibit 3: Expense Items: Budget Q2 2000
				Actual	Budget	% Variable
	Advertising and Promotion			$ 22,100	$ 15,100	0%
	Administrative and Support Staff			225,000	191,250	80%
	Information Systems			126,200	120,000	80%
	Depreciation			23,400	22,700	0%
	Dues and Subscriptions			11,800	13,100	80%
	Education and Training			36,200	38,900	80%
	Equipment Leases			23,500	22,440	25%
	Insurance			33,600	32,200	0%
	Professional Services			39,500	34,700	0%
	Office Expense			42,100	36,550	100%
	Office Supplies			86,200	89,600	80%
	Postage			27,300	24,700	80%
	Rent - Real Estate			117,260	117,260	0%
	Telephone			40,000	38,500	100%
	Travel and Entertainment			57,800	56,300	100%
	Utilities			$ 26,600	$ 24,000	25%
	Total			$ 938,560	$ 877,300
Question 3:
	Prepare a variance analysis of expenses based on the additional information supplied in Exhibit 3.
Formulas and approach:
	Variance analysis formula: Total revenue variance = AR - ER
	Flexible budget: Fixed expenses + variable expenses
	Volume variance: (AQ-EQ)*cost per unit
	Prepare a flexible budget to display the spending variance attributable to fixed (committed) and
	variable expenses. Calculate the volume variance for the difference in number of consultants
Your Solution:
	Actual	Budget	% Variable	Budgeted Variable	Budgeted Fixed
Advertising and promotion	22,100	15,100	0%
Admin. and support staff	225,000	191,250	80%
Information systems	126,200	120,000	80%
Depreciation	23,400	22,700	0%
Dues and subscriptions	11,800	13,100	80%
Education and training	36,200	38,900	80%
Equipment leases	23,500	22,440	25%
Insurance	33,600	32,200	0%
Professional services	39,500	34,700	0%
Office expense	42,100	36,550	100%
Office supplies	86,200	89,600	80%
Postage	27,300	24,700	80%
Rent - real estate	117,260	117,260	0%
Telephone	40,000	38,500	100%
Travel and entertainment	57,800	56,300	100%
Utilities	26,600	24,000	25%
Total	938,560	877,300
Number of consultants
Budgeted variable/consultant
Calculate spending variance from flexible budget	Actual Expenses	Budgeted Fixed	Budgeted Variable per Consultant	Actual Number of Consultants	Flexible Budget	Spending Variance	Favorable/ Unfavorable?
Calculate volume variance			Actual Number of Consultants	Budgeted Number of Consultants	Budgeted Variable per Consultant	Volume Variance	Favorable/ Unfavorable?

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