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 to offer 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 4100 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 analysed 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.

(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 utilisation

(vi) Innovation.

Table 1: BS Ltd Sundry statistics for year ended 30 April

	Budget	Actual
Number of consultants:
Administration	30	23
Data processing	12	20
Marketing	18	17
Consultants hours analysis:
contract negotiation hours	4800	9240
remedial advice hours	2400	7920
other non-chargeable hours	12000	22440
general development work hours (chargeable)	12000	6600
customer premises contract hours	88800	85800
Gross hours	120000	132000
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

Answer rating: 100% (QA)

a i Analysis of Actual Consultancy Hours Standard Chargeable Hours Actual Chargeable Hours Gross Hours Other Nonchargeable Hours 132000 22440 109560 h... View the full answer