Question

Exchange Corp. is a company that acts as a facilitator in tax-favored real estate swaps. Such swaps, know as 1031 exchanges, permit participants to avoid some or all of the capital gains taxes that would otherwise be due. The bookkeeper for the company has been asked to prepare a report for the company to help its owner/manager analyze performance. The first such report appears below: Exchange Corp. Analysis of Revenues and Costs For the Month Ended May 31 Planning Budget actual unit unit Revenues Revenues and and costs costo Variances Exchanges completed 25 $ 600 $ 60 SBOU Revenue Expensest Legal and search fees office expenses Equipment depreciation Total expense Net operating income Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $248 per exchange completed on the planning budget, whereas, the average actual office expense is $219 per exchange completed Legal and search fees is a variable cost: office expenses is a mixed cost and equipment depreciation, rent, and insurance are fixed costs. In the planning budget the fored component of office expenses was $4.900

Answer 1

1
NO, the report prepared by bookkeeper is not a useful performance report
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	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Exchanges completed	30			30			25
Revenue	18000	2400	U	20400	3400	F	17000
Expenses:
Legal and search fees	7170	570	U	6600	1100	U	5500
Office expenses	6570	110	U	6460	260	U	6200
Equipment Depreciation	750	0	None	750	0	None	750
Rent	2250	0	None	2250	0	None	2250
Insurance	450	0	None	450	0	None	450
Total expense	17190	680	U	16510	1360	U	15150
Net operating income	810	3080	U	3890	2040	F	1850
Office expenses:
Variable component = (6200-4900)/25 = $52
Office expenses in flexible budget = 4900+(30*52) = $6460