Examine the solution to the flexible budgeting in-class problem. Do you find any indication of a problem that the firms management should address? Be specific about what may be wrong. Note: there could easily be more than one problem.

A B C D E F G 1 Rate 2 N/A 3 Variance 240 F Budget 18,000 13,680 4,560 237,120 Service Calls Completed on site Towed Kilometers driven 75% of service calls 25% of service calls 13 per service call 701 U Actual 18,240 12,979 5,261 269,800 4 701 U 32,680 U 5 6 7 645,950 U 11,032,150 789,150 10,386,200 789,150 8 9 10 $850 per repair on site Revenue (from repairs) 150 per car towed Revenue (from towing) Variable costs: 0.22 per k driven Gas 85 per repair on site Parts 180 per repair on site Payments to drivers 2.30 per k driven Maintenance for trucks Fixed costs Salaries Amortization on trucks 8,044 U 182,615 F 11 59,356 1,103,215 2,336,220 620,540 67,400 920,600 2,336,220 493,400 12 13 127,140 F 14 15 5,000 U 70,000 950,000 75,000 950,000 16 17 18 6,681,969 19 Budgeted NI Actual NI Net Variance 6,332,730 20 349,239 21 A B C D E F G 1 Rate 2 N/A 3 Variance 240 F Budget 18,000 13,680 4,560 237,120 Service Calls Completed on site Towed Kilometers driven 75% of service calls 25% of service calls 13 per service call 701 U Actual 18,240 12,979 5,261 269,800 4 701 U 32,680 U 5 6 7 645,950 U 11,032,150 789,150 10,386,200 789,150 8 9 10 $850 per repair on site Revenue (from repairs) 150 per car towed Revenue (from towing) Variable costs: 0.22 per k driven Gas 85 per repair on site Parts 180 per repair on site Payments to drivers 2.30 per k driven Maintenance for trucks Fixed costs Salaries Amortization on trucks 8,044 U 182,615 F 11 59,356 1,103,215 2,336,220 620,540 67,400 920,600 2,336,220 493,400 12 13 127,140 F 14 15 5,000 U 70,000 950,000 75,000 950,000 16 17 18 6,681,969 19 Budgeted NI Actual NI Net Variance 6,332,730 20 349,239 21