Question

Cannot figure out what the office supplies total is under the flexible budget column. Not sure what I am missing.

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: 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 30 25 Revenue $ 600 $ 680 $ 80 U Expenses: Legal and search fees 239 220 19 U Office expenses 160 248 88 F Equipment depreciation 25 30 5 F Rent 75 90 15 F Insurance 15 18 3 F Total expense 514 606 92 F Net operating income $ 86 $ 74 $ 12 F Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $248 per exchange completed on the planning budget; whereas, the average actual office expense is $160 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 $4,900. 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? Yes No 2. Complete a performance report that would help the owner/manager assess the performance of the company in May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

1
No,report prepared by the bookkeeper is not useful as a performance report
2
	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Exchanges completed	30			30			25
Revenue	18000	2400	U	20400	3400	U	17000
Expenses:
Legal and search fees	7170	570	U	6600	1100	F	5500
Office expenses	4800	1660	F	6460	260	F	6200
Equipment depreciation	750	0	None	750	0	None	750
Rent	2250	0	None	2250	0	None	2250
Insurance	450	0	None	450	0	None	450
Total expense	15420	1090	F	16510	1360	F	15150
Net operating income	2580	1310	U	3890	2040	U	1850
Workings for Office expense:
Variable cost per unit=(6200-4900)/25= $52
Office expense in Flexible budget = 4900+(30*52)= $6460