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

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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