BS Ltd provides consultancy services to small and medium sized businesses. Three types of consultants are employed offering administrative, data processing and marketing advice respectively. The consultants work partly on the client’s premises and partly in BS Ltd premises, where chargeable development work in relation to each client contract will be undertaken. Consultants spend some time negotiating with potential clients attempting to secure contracts from them. BS Ltd has recently implemented a policy change which allows for a number of follow-up (remedial) hours at the client’s premises after completion of the contract in order to eliminate any problems which have arisen in the initial stages of operation of the system.

Contract negotiation and remedial work hours are not charged directly to each client. BS Ltd carries out consultancy for new systems and also offers advice on existing systems which a client may have introduced before BS Ltd became involved. BS Ltd has a policy of retaining its consultancy staff at a level of 60 consultants on an ongoing basis.

Additional information for the year ended 30 April is as follows:

(i) BS Ltd invoices clients £75 per chargeable consultant hour.

(ii) Consultant salaries are budgeted at an average per consultant of £30 000 per annum. Actual salaries include a bonus for hours in excess of budget paid for at the budgeted average rate per hour.

(iii) Sundry operating costs (other than consultant salaries)

were budgeted at £3 500 000. Actual was £4 100 000.

(iv) BS Ltd capital employed (start year) was £6 500 000.

(v) Table 1 shows an analysis of sundry budgeted and actual quantitative data.

Required:

(a) (i) Prepare an analysis of actual consultancy hours for the year ended 30 April which shows the increase or decrease from the standard/allowed non-chargeable hours. This increase or decrease should be analyzed to show the extent to which it may be shown to be attributable to a change from standard in:

1. standard chargeable hours; 2. remedial advice hours;

3. contract negotiation hours; 4. other non-chargeable hours. 

(ii) Calculate the total value of each of 1 to 4 in

(a) above in terms of chargeable client income per hour. (4 marks)

(b) BS Ltd measure business performance in a number of ways. For each of the undernoted measures, comment on the performance of BS Ltd using quantitative data from the question and your answer to

(a) to assist in illustrating your answer:

(i) Financial performance

(ii) Competitive performance

(iii) Quality of service (iv) Flexibility (v) Resource utilization (vi) Innovation.

Transcribed Image Text:

Table 1: BS Ltd Sundry statistics for year ended 30 April Budget Actual Number of consultants: Administration 30 23 Data processing Marketing Consultants hours analysis: 12 20 18 17 contract negotiation hours 4800 9240 remedial advice hours 2400 7920 other non-chargeable hours 12000 22 440 general development work hours (chargeable) 12000 6600 customer premises contract hours 88 800 85 800 Gross hours 120 000 132 000 Chargeable hours analysis: new systems 70% 60% existing systems advice 30% 40% Number of clients enquiries received: new systems 450 600 existing systems advice 400 360 Number of client contracts worked on: new systems 180 210 existing systems advice 300 288 Number of client complaints 5 20 Contracts requiring remedial advice 48 75