2. Explain information above.

"I just don't understand why you're worried about analyzing our profit variance," said Dave Lundberg to his partner, Adam Dixon. Both Lundberg and Dixon were partners in the Dallas Consulting Group (DCG). "Look, we made $800,000 more profit than we expected this past year (see Exhibit 1). That's great as far as I am concerned," said Dave. Adam Dixon agreed to come up with data that would help sort out the causes of DCG's $800,000 profit variance. DCG is a professional services partnership of three established consultants and six associates who specialize in helping firms in cost reduction through efficiency/lean studies, streamlining production by optimizing physical layout, and reengineering studies. For each project DCG consultants spend the bulk of the total project time studying customers' operations. The three partners and six associates each received fixed salaries that represented the largest portion of operating expenses. All three used their home office for DCG business. DCG itself had only a post office box. All other DCG employees were also paid fixed salaries. No other significant operating costs were incurred by the partnership. There are no significant variable costs. Revenues consist solely of professional fees charged to clients for the two different types of services DCG offered: reengineering and streamlining production. Charges were based on the number of hours actually worked on the job. Following the conversation with Lundberg, Dixon gathered the data summarized in Exhibit 2. He took the data with him to Lundberg's office and said, "I think I can identify several reasons for our increased profits. First of all, we exceeded our budget on sales of streamlining services by 3,000 hours. Also I believe I can find evidence that the work for reengineering in the consulting business has declined in recent months, while the demand for streamlining production has increased. "This is indeed interesting, Adam," replied Lundberg. "Do you think you could quantify the effects of these factors in terms