Clark Services a division of General Service Industries operating in New Zealand, offers consulting services to clients. The corporate management at General Service is pleased with the performance of Clark Services For the first nine months current year and has recommended that the divisional manager of Clark Services. Richard Smyth. Submit revised budget for the remaining quarter, as the division has exceeded the budgeted operating for the year to date by 20 per cent. An unexpected increase in the number of billed hours over the original plan is the main reason for this increase in profit. The original operating budget for the first three quarters for Clark Services is as follows:

Smyth will take the following information into account in his revised budget for the fourth quarter:

Revenue	1st quarter	2nd quarter	3rd quarter	Nine months
Consulting fees: Management consulting	945000	945000	945000	2835000
Computer system consulting	1265625	1265625	1265625	3796875
Total consulting fees	2210625	2210625	2210625	6631875
Other revenue	100000	100000	100000	300000
Total revenue	2310625	2310625	2310625	6931875
Expenses
Consultant salary	1160250	1160250	1160250	3480750
Travel	136875	136875	136875	410625
General and administrative	300000	300000	300000	900000
Depreciation	120000	120000	120000	360000
Corporate allocation	150000	150000	150000	450000
Total expenses	1867125	1867125	1867125	5601375
Operating profit	443500	443500	443500	1330500

The division currently has 25 consultants on staff—10 for management consulting and 15 for computer systems consulting. Three additional management consultants have been hired to start work at the beginning of the fourth quarter in order to meet the increased client demand.

The hourly billing rate consulting revenue will remain at $270 per hour for each management consultant and $225 per hour for each computer consultant. However, due to the increase in billed hours compared with the plan during the first nine months , the budgeted billed hours will be increased by an additional 50 hours for each consultant (new and old) in the fourth quarter.

The budgeted annual salaries and actual annual salaries. Paid monthly, are the same; $150,000 for a management consultant and $138 000 for computer consultant. Corporate management has approved a merit increase of 10 per cent at the beginning of the fourth quarter for all 25 existing consultants, while the new consultants will be compensated at the planned rate.

The planned salary expense in the Original budget includes an allowance for employee on-costs and Benefits amounting to 30 per cent of the annual salaries. However, the introduction of corporate. Wide bonus program Will increase the amount to 40 per in the fourth quarter-

The original plan assumes a fixed hourly rate for travel and other« related expenses for each billing Hours of consulting. These are expenses that are not reimbursed by the client, and previously Determined hourly rate has proven to be adequate to cover these costs

Other revenue, derived from temporary rentals and interest, is expected be the same in the fourth quarter as in each of the previous quarters.

General and administrative expenses have been favorable at 7 below the plan; this 7 per Cent saving On fourth-quarter expenses will be reflected in the revised plan.

Depreciation Of office equipment and personal computers will stay constant at the projected straight line rate.

Due to the favorable performance during the first three quarters and the division's increased ability To absorb costs, the corporate management at General Service Industries has increased the corporate Expense allocated to the division by 50 percent for the fourth quarter.

1.Prepare revised operating budget for the fourth quarter for Clark Services. This revised budget will be presented by Richard Smyth to General Service Industries,
2. what factors might cause an organization to prepare revised operating budget?

Answer rating: 100% (QA)

ANSWER 1 Here is the revised operating budget for Q4 Revenue Consulting fees Management consulting C... View the full answer