PROBLEM 9–25 Critiquing a Report; Preparing a Performance Budget [LO1, LO4, LO6]
Facilitator Corp. is a company that acts as a facilitator in tax-favored real estate swaps. Such swaps, known 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 $209 per exchange completed on the planning budget; whereas, the aver- age actual office expense is $172 per exchange completed.
Legal and search fees is a variable cost; office expenses is a mixed cost; and equipment depre- ciation, rent, and insurance are fixed costs. In the planning budget, the fixed component of office expenses was $4,100.
All of the company’s revenues come from fees collected when an exchange is completed.
1. Evaluate the report prepared by the bookkeeper.
2. Prepare a performance report that would help the owner/manager assess the performance of the company in May.
3. Using the report you created, evaluate the performance of the company in May.
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