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Determine professional labor rate and efficiency variances

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Reference no: EM13877183

Flexible Budget and Operating-Profit Variances Phoenix Management helps rental property owners find renters and charges the owners one-half of the first month's rent for this service. For August 2010, Phoenix expects to find renters for 100 apartments with an average first month's rent of $700. Budgeted cost data per tenant application for 2010 follow:

• Professional labor: 1.5 hours at $20 per hour.

• Credit checks: $50.

Phoenix expects other costs, including lease payment for the building, secretarial help, and utilities, to be $3,000 per month. On average, Phoenix is successful in placing one tenant for every three applicants.

Actual rental applications in August 2010 were 270. Phoenix paid $9,500 for 400 hours of profes- sional labor. Credit checks went up to $55 per application. Other support costs in August 2010 were $3,600. The average first monthly rentals for August 2010 were $800 per apartment unit for 90 units.

Required

1. Prepare a profit-variance report similar to text Exhibit. Compute the total flexible-budget variance and the sales volume variance for Phoenix's operations in August 2010.

2. Determine the professional labor rate and efficiency variances for August 2010.

3. What nonfinancial factors should Phoenix consider in evaluating the effectiveness and efficiency of professional labor?

Reference no: EM13877183

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