Fougere Realtors, Inc._BUdgets

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Description

 

 Fougere Realtors, Inc. specializes in home
re-sales. It earns revenue from selling fees. Fougere Realtors’ major
costs are commissions for salespersons, listing agents, and listing
companies. Its business has improved steadily over the last ten years. As
usual, Chris Fougere, the managing partner of Fougere Realtors, Inc., received
a report summarizing the performance for the most recent year.

Fougere Realtors, Inc.

Performance Report

For the year ended December 31, 2007


Budget
Actual Variance

Number of home
re-sales
180

202

22
F

Variable expenses

Sales
commissions

$1,102,950
$1,205,183 $102,233 U

Automobile

36,000
39,560 3,560 U

Advertising

171,000
192,690
21,690 U

General
overhead
656,100

716,970
60,870 U

Total
$1,966,050
$2,154,403 $188,353 U

Fixed expenses

General overhead
60,000
62,300

2,300
U

Total
expenses $2,026,050 $2,216,703 $190,653 U

Required:

a) Explain the major weakness of this performance
report and why all the variances for the variable expenses are
unfavourable (U) (5 marks)

b) As a first step in
helping Chris Fougere to evaluate cost / expense control in the organization,
complete the following for the year ended December 31, 2007, assuming the only
cost driver is the number of home re-sales. (Note: Indicate any variance
as either favourable (F) or unfavourable (U).) (15 marks)

Budget
Actual Variance

Number of home
re-sales 202
202

0

Variable expenses

Sales
commissions $
$ 1,205,183
_________

Automobile $
_________

39,560 _________

Advertising $
_________

192,690
_________

General
overhead $
_________

716,970

_________

Total $
_________

$2,154,403
_________

Fixed expenses

General
overhead $
_________

62,300

_________

Total
expenses $ $2,216,703

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