Exchange Corp. is a company that acts as a facilitator in tax-favored real estat

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:

Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $224 per exchange completed on the planning budget; whereas, the average actual office expense is $181 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 fixed component of office expenses was $4,400.

All of the company’s revenues come from fees collected when an exchange is completed.

Required:

1. Is the report prepared by the bookkeeper useful as a performance report?

2. Complete the performance report that would help the owner/manager assess the performance of the company in May.

Exchange Corp.
Analysis of Revenues and Costs
For the Month Ended May 31 Actual Unit Revenues
and Costs Planning Budget
Unit Revenues
and Costs Variances Exchanges completed 25 20 Revenue $ 560 $ 600 $ 40 U Expenses: Legal and search fees 191 180 11 U Office expenses 181 224 43 F Equipment depreciation 24 30 6 F Rent 60 75 15 F Insurance 12 15 3 F Total expense 468 524 56 F Net operating income $ 92 $ 76 $ 16 F

Explanation / Answer

Particulars Actual Revenue and spending variance Flexible budget Activity variance Static budget Units 25 25 20 Revenue 14000 1000 U 15000 3000 F 12000 Expenses Legal and search fees 4775 275 U 4500 900 U 3600 Office expense 4525 25 U 4500 20 U 4480 Equipment depreciation 600 0 600 0 600 Rent 1500 0 1500 0 1500 Insurance 300 0 300 0 300 Total expense 11700 300 U 11400 920 U 10480 Net operating income 2300 1300 U 3600 2080 F 1520

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.