Realtors, Inc. specializes in home re-sales.It earns revenue from selling fees.First Rate 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 First Rate 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 whyall the variances for the variable expenses are unfavourable (U)

b)As a first step in helping Chris Fougere to evaluate cost / expense control in the organization, complete the following report 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).)

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 _______