Reference no: EM132546562

ABC Properties Limited helps prospective homeowners of substantial means to find low-cost financing and assists existing homeowners in refinancing their current loans at lower interest rates. ABC works only for customers with excellent borrowing potential. Hence, ABC is able to obtain a loan for every customer with whom it decides to work.

ABC charges clients 0.5% of the loan amount it arranges. In 2017, the average loan amount per customer was ¢199,000. In 2018, the average loan amount was ¢200,210. In its 2019 flexible budgeting system, ABC assumes the average loan amount will be ¢200,000.

Budgeted cost data per loan application for 2019 are:

1. Professional labour: 6 budgeted hours at a budgeted rate of ¢40 per hour
2. Loan filing fees: budgeted at ¢100 per loan application 
3. Credit checks: budgeted at ¢120 per loan application 
4. Courier mailings: budgeted at ¢50 per loan application.

Office support (the costs of leases, secretarial workers and others) is budgeted to be ¢31,000 per month. ABC Properties views this amount as a fixed cost.

Actual loan applications in November 2019 were 120.

Other actual data for November 2019 were:

1. Professional labour: 7.2 hours per loan application at ¢42 per hour
2. Loan filing fees: ¢100 per loan application 
3. Credit checks: ¢125 per loan application 
4. Courier mailings: ¢54 per loan application. 
5. Office support costs for November 2019 were ¢33,500. 
6. The average loan amount for November 2019 was ¢224,000. 
7. ABC received its 0.5% fee on all loans

Required:

Question 1) Generate a flexible budget variance analysis of ABC for November 2019. ABC's output measure in its flexible budgeting system is the number of loan applications. Comment on the performance of ABC Properties Limited.

Question 2) What factors would you consider in evaluating the effectiveness of professional labour in November 2019?