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

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

Actual Budget Variable Advertising and Promotion 0% 22,100 15,100 80% Administrative and Support Staff 225,000 191,250 Information Systems 126,200 120,000 80% 0% Depreciation 23,400 22,700 Dues and Subscriptions 11,800 13,100 80% Education and Training 36,200 38,900 80% Equipment 23,500 22,440 25% Leases 33,600 Insurance 32,200 0% 0% Professional 39,500 34,700 Services 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 57,800 56,300 100% Entertainment Utilities 25% 26,600 24,000 Total 938,560 877,300