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10-51    Budgeting for a Service Firm Refer to the AccuTax, Inc., example in the chapter. One of the part- ners is planning to retire at the end of the year. May Higgins, the sole remaining partner, plans to add a manager at an annual salary of $90,000. She expects the manager to work, on average, 45 hours a week for 45 weeks per year. She plans to change the required staff time for each hour spent to com- plete a tax return to the following:
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|
 |
 Business Return |
Complex IndividualReturn |
Simple IndividualReturn |
|
Partner Manager Senior consultant Consultant |
0.3 hour 0.2 hour 0.5 hour — |
0.05 hour 0.15 hour 0.40 hour 0.40 hour |
— — 0.2 hour 0.8 hour |
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The manager is salaried and earns no overtime pay. Senior consultants are salaried but receive time and a half for any overtime worked. The firm plans to keep all the senior consultants and adjust the number of consultants as needed including employing part-time consultants, who also are paid on an hourly basis. The partner has also decided to have five supporting staff at $40,000 each. All other operating data remain unchanged. The manager will share 10 percent of any profit over
$500,000 before bonus.
Required  Set up an Excel spreadsheet to answer the following questions:
1.   What is the budgeted total cost for overtime hours worked by senior consultants?
2.   How many full-time consultants should be budgeted?
3.   Determine the manager’s total compensation and total pretax operating income for the firm, assuming that the revenues from preparing tax returns remain unchanged.
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