This legal department of a financial services company prepared a (static) budget (shown above) at the end of the month the corporate controller provided the department performance to budget report shown above. The controller is concerned that the department did not meet its budget and was very unfavorable in spending. You have been asked to explain the department's performance. The legal department primarily does contract creation and processing for clients. Most contracts are very similar in length and complexity. The department had planned on 60 contracts per month. In the most recent month, they processed 50 contracts.

1. Perform the operating budgeting analysis with a flexible budget based on the 50 contracts.
2. Following the instructions & assumptions above, recalculate all the variances.
3. Briefly explain the variance for each line item of the budget. Include in your explanation one possible reason for the variance between the actual spending and the flexible budget.
    

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Monthy Department Expense Report (Legal Services) Budget $000s Actual Variance Unf $000s (Fav) Salaries ($60k per person) Fringe benefits Temporary Help Office Supplies Office Equipment depreciation Employee training Fees and Licenses 180 240 60 54 72 18 U 30 45 15 U 3 10 10 8 4 -1 F Total Department 290 387 97 U Monthy Department Expense Report (Legal Services) Budget $000s Actual Variance Unf $000s (Fav) Salaries ($60k per person) Fringe benefits Temporary Help Office Supplies Office Equipment depreciation Employee training Fees and Licenses 180 240 60 54 72 18 U 30 45 15 U 3 10 10 8 4 -1 F Total Department 290 387 97 U

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