Software Associates Case Study Essay

2169 Words9 Pages
Software Associates Executive Summary Software Associates was founded by Richard Norton in 1990 in order to perform system integration projects for clients. During the rapid technological growth of the 1990’s the company grew and prospered. Annual revenues exceeded $12 million, and profit margins were generally between 15%-20%. Their services include a contract business which offers clients experienced consultants to implement personalized IT tools and solutions. However, in 2000, founder and CEO of Software Associates, Richard Norton, had an urgent and tough question to answer; with higher than forecasted revenues, why is their bottom line less than half of what they had budgeted? Variance Analysis Report In order to perform a…show more content…
This amounted to $147,465. This is the extra amount Software Associates paid due to the labor cost change. The two numbers, $133,200 and $147,465, equal $280,800. The difference in consultant salaries cost from actual to expect cost is $280,800. Overall operating expense is broken down into two categories, actual and expected. Subtract the actual operating expense, $938,560, from the expected operating expense of $877,300 to get the variance of $61,260. This amount is unfavorable. Jenkins found the total expense variance by completing the same equation. She subtracted the expected total expense from the actual total expense. The total expense variance was found to be $342,060. The extra hours worked created more costs than the extra revenue acquired. This puts the company in an awful position. The budget was not planned out very well. The price of the billed labor decreased while more labor was done and less was billed for. This is an equation for disaster as you can see. More planning must be taken when figuring out a budget and Software Associates must stick strictly to the budget for reasons like this. Numbers can add up quickly. Expense Analysis: Spending and Volume Variance Analysis of Operating Expenses Jenkins then needed to analyze the expense analysis. Many of the expenses for Software Associates were not entirely fixed costs or variable costs. Rather, many of the
Open Document