Realtors, Inc., specializes in the sale of residential properties. It earns its revenue by charging a percentage of the sales price. Commissions for sales persons, listing agents, and listing companies are its main costs. Business has improved steadily over the last 10 years. The managing partner of Realtors, Inc., receives a report summarizing the company’s performance each year. The report for the most recent year follows.

Required
1. Analyze the performance report. What does it say about the company’s performance? Is the performance report reliable? Explain your answer.
2. Calculate the budgeted selling fee and budgeted variable costs per home sale.
3. Prepare a performance report using a flexible budget based on the actual number of home sales.
4. Analyze the report you prepared in requirement 3. What does it say about the company’s performance? Is the report reliable? Explain your answer.
5. What recommendations would you make to improve the company’s performance nextyear?

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Realtors, Inc. Performance Report For the Year Ended December 31 Difference Budget* $2,052,000 Actual Under (Over) Budgeted $2,242,200 $(190,200) Total selling fees Variable costs: Sales commissions Automobile Advertising Home repairs General overhead Total variable costs 1,102,950 $1,205,183 39,560 103,450 89,240 716,970 $1,966,050 $2,154,403 36,000 93,600 77,400 656,100 $(102,233) (3,560) (9,850) (11,840) (60,870) $(188,353) Fixed costs: General overhead Total costs Operating income 60,000 2,026,050 $ 25,950 62,300 $2,216,703 25,497 (2,300) $(190,653) 5453 Budgeted data are based on 180 units sold. Actual data for 200 units sold.