16th Edition

ISBN: 9781323818923

Author: Datar

Publisher: PEARSON

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Chapter 7, Problem 7.33E

Static and flexible budgets, service sector. Student Finance (StuFi) is a start-up that aims to use the power of social communities to transform the student loan market. It connects participants through a dedicated lending pool, enabling current students to borrow from a school’s alumni community. StuFi’s revenue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and the student borrower for every loan originated on its platform.

StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with that ambition. StuFi’s budgeted and actual results for the third quarter of 2017 are presented below.

Chapter 7, Problem 7.33E, Static and flexible budgets, service sector. Student Finance (StuFi) is a start-up that aims to use

1. Prepare StuFi’s static budget of operating income for the third quarter of 2017.
2. Prepare an analysis of variances for the third quarter of 2017 along the lines of Figure 7-2; identify the sales volume and flexible budget variances for operating income.
3. Compute the professional labor price and efficiency variances for the third quarter of 2017.
4. What factors would you consider in evaluating the effectiveness of professional labor in the third quarter of 2017?

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Chapter 7, Problem 7.32E

Chapter 7, Problem 7.34P

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Chapter 7 Solutions

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Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...

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Solution Summary: The author explains that the sales of the proposed project are more than all fixed and variable costs and thus, the project is generating an operating income.

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