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Problem 9-23 Critiquing a Report: Preparing a Performance Budget [LO9-1, LO9-4, LO9-6] 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 Planning Actual Budget Unit Unit Revenues Revenues and Costs and Costs Variances Exchanges completed 30 25 620 110 U 730 Revenue Expenses Legal and search fees 269 245 24 U Office expenses 138 263 125 F Equipment depreciation 25 30 5 F Rent 75 90 15 F Insurance 15 18 3 F Total expense 522 646 124 F Net operating income 98 84 14 F Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $263 per exchange completed on the planning budget; whereas, the average actual office expense is $138 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 $5,150. All of the company's revenues come from fees collected when an exchange is completed