Motors is preparing a sales budget for the current year for the service department that based on last year's actual amounts. Management is interested in understanding what might happen if the service department has an increase in sales volume or an increase in the average revenue per mechanic hour. They believe it is unlikely that both would increase, due to economic conditions in the local market. Last year's sales amounts were as follows: January Mechanic Hours Total Revenues january 1,174 $11,681 February 1,057 10,538 March 1,125 11,261 April 1,516 15,008 may 1,724 16,981 June 2,51 5 25,014 july 2.746 27,185 August 3,107 30,604 September 2.421 23,823 October 2,211 22,154 November 1,709 17,090 December 1,524 15,125 Required A. Compute the average revenue per mechanic hour for the current year based on last year's actual data .
You should round the average hourly rate to the nearest penny. B. Prepare a monthly sales budget for the current year. assuming that monthly sales volume will be 10 percent greater than in the same month last year. Assume that the average revenue per mechanic hour is the same as you computed in quest ion A. You should round budgeted hours to one decimal and budgeted revenues to the nearest dollar. C. Prepare a monthly sales budget for the current year assuming that the average revenue. per mechanic hour computed 1n question A increased by 5 percent. Assume that the number of mechanic hours stays the same as in the prior year. That is, there is no increase or decrease in the monthly sales volume. You should rate per mechanic hour to two decimals and budgeted revenues to the nearest dollar. D. For the current year in total. is it more advantageous to increase sales volume by 10 per cent or average revenue per hour by 5 percent? Remember the impact of variable and fixed costs on these projections.