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Llama Realtors, Inc., earns it revenue from re-selling houses. Commissions for salespersons, listing agents and listing companies are their major expenses. As a result of

Llama Realtors, Inc., earns it revenue from re-selling houses. Commissions for salespersons, listing agents and listing companies are their major expenses. As a result of the strong market over the past decade, business has been improving. As usual, Chris Llama, the managing partner of Llama Realtors, Inc., received a report summarizing the performance for the most recent year. Llama Realtors, Inc. Performance Report For the year ended December 31, 2019

Budget Actual Variance
Number of home re-sales 185 204 19 F
Variable expenses
Sales commissions $1,102,600 $1,207,365 $104,765 U
Automobile 36,075 38,880 2,805 U
Advertising 170,940 193,460 22,520 U
General overhead 656,565 720,970 64,405 U
Total $1,966,180 $2,160,675 $194,495 U
Fixed expenses
General overhead 60,000 64,380 4,380 U
Total expenses $2,026,180 $2,225,055 $198,875 U

Required: a) What are the major weakness of the performance report and explain what the problems are. b) Explain clearly why all the variances for the variable expenses are unfavourable (U). c) In order to help Chris Llama evaluate his cost/expense control in the organization, complete the following for the year ended December 31, 2019, 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 ____ 204 ____
Variable expenses
Sales commissions $_____ $1,207,365 $_____
Automobile $_____ 38,880 $_____
Advertising $_____ 193,460 $_____
General overhead $_____ 720,970 $_____
Total $_____ $2,160,675 $_____
Fixed expenses
General overhead $_____ 62,300 $_____

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