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 22F

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 2,154,403 188,353U

Fixed expenses

General overhead 60,000 62,300 2,300U

Total expenses 2,026,050 2,216,703 190,653U

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 resales 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 _________