Student Finance (StuFi) is a startup that aims to use the power of social communities to transform the student loan market. It connects participants through a dedicated lending pool, enabling current students to borrow from a school’s alumni community. StuFi’s revenue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and the student borrower for every loan originated on its platform.

StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with that ambition. StuFi’s budgeted and actual results for the third quarter of 2014 are presented below.

Required
1. Prepare StuFi’s static budget of operating income for the third quarter of 2014.
2. Prepare an analysis of variances for the third quarter of 2014 along the lines of Exhibit; identify the sales volume and flexible budget variances for operating income.
3. Compute the professional labor price and efficiency variances for the third quarter of 2014.
4. What factors would you consider in evaluating the effectiveness of professional labor in the third quarter of2014?

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Static Budget Actual Results New loans originated Average amount of loan 一一1145000 $162000 Variable costs per loan $360 8hrs at $45 per hour) $475(9.5 hrs at $50 per hour) Professional labor Credit verification Federal documentation fees$120 Courier services $100 $50 $800,000 Technology costs (fixed ,300,000 $100 $125 $54 945,000 1415.000 Administrative costs (fixed)