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 Budget Actual Unit Unit Revenues Revenues and and Costs Costs Variances Exchanges completed 25 $ 592 5630 $400 195 209 193 233 Revenue Expenses: Legal and search fees Office expenses Equipment depreciation Rent Insurance Total expense Net operating income 30 75 15 14 U 43 F 6 F 15 F 3 F 12 $ 95 32 13 Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $233 per exchange completed on the planning budget, whereas, the average actual office expense is $190 per exchange completed. Legal and search fees is a variable cost: office expenses is a mixed costs and equipment depreciation, rent, and insurance are fixed costs. In the planning budget, the fixed component of office expenses was $4,500. 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? 2. Complete the performance report that would help the owner/manager assess the performance of the company in May. Required 1 Required 2 Complete the performance report that would help the owner/manager assess the performance of the company in May. (Indicate the effect variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (Le., zero variance). Input all amounts as positive val Exchange Corp. Flexible Budget Performance Report For the Month Ended May 31 Revenue and Spending Flexible Variances Budget Actual Results Activity Variances Planning Budget Exchanges completed Revenue $ 14,750 1,000 U 15.750 $ 3.150 12,600 Expenses Legal and search fees 5.225 350U 4.875 900 4.700 975 U 40U None None 600 None 1,500 None Office expenses Equipment depreciation Rent Insurance Total expense Net operating income $ 2.225