fougere realtors inc budgets 497262

Fougere Realtors, Inc. specializes in home re-sales. It earns revenue from selling fees. Fougere 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 Fougere 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 why all the variances for the variable expenses are unfavourable (U) (5 marks)

b) As a first step in helping Chris Fougere to evaluate cost / expense control in the organization, complete the following 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).) (15 marks)

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 _________

Total expenses $ $2,216,703