J.B.M. Consulting, LLP uses CVP analysis to consider and manage the costs of providing consulting services. Consulting revenues for the most recent period were $2,000,000. Management has determined that contribution margin was 35% of consulting revenues. Fixed costs were $350,000. J.B.M. currently charges a single hourly billing rate for all associate hours. Moreover, revenue is recognized on a "completed contract"
basis (i.e., no revenue is recognized until the service is complete). J.B.M charged 10,000 hours during the period.
The management team is concerned that certain costs previously classified as variable are actually fixed. If $50,000 of variable costs from last period were reclassified as fixed costs, by how much would the break-even number of billing hours increase or decrease?

Question

Quizplus · Accepted Answer

The Answer of J.B.M. Consulting, LLP uses CVP analysis to consider and manage the costs of providing consulting services. Consulting revenues for the most recent period were $2,000,000. Management has determined that contribution margin was 35% of consulting revenues. Fixed costs were $350,000. J.B.M. currently charges a single hourly billing rate for all associate hours. Moreover, revenue is recognized on a "completed contract"
basis (i.e., no revenue is recognized until the service is complete). J.B.M charged 10,000 hours during the period.
The management team is concerned that certain costs previously classified as variable are actually fixed. If $50,000 of variable costs from last period were reclassified as fixed costs, by how much would the break-even number of billing hours increase or decrease?

JBM Consulting, LLP Uses CVP Analysis to Consider and Manage