Question

8.

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

	Fixed Component per Month			Variable Component per Job			Actual Total for February
Revenue				$	277		$	33,260
Technician wages	$	8,600					$	8,450
Mobile lab operating expenses	$	4,900		$	31		$	8,770
Office expenses	$	2,400		$	3		$	2,640
Advertising expenses	$	1,550					$	1,620
Insurance	$	2,880					$	2,880
Miscellaneous expenses	$	930		$	1		$	365

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,900 plus $31 per job, and the actual mobile lab operating expenses for February were $8,770. The company expected to work 130 jobs in February, but actually worked 132 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Jobs	132			132			130
Revenue	33260	3304	U	36564	554	F	36010
Expenses:
Technician wages	8450	150	F	8600	0	None	8600
Mobile lab operating expenses	8770	222	F	8992	62	U	8930
Office expenses	2640	156	F	2796	6	U	2790
Advertising expenses	1620	70	U	1550	0	None	1550
Insurance	2880	0	None	2880	0	None	2880
Miscellaneous expenses	365	697	F	1062	2	U	1060
Total expense	24725	1155	F	25880	70	U	25810
Net operating income	8535	2149	U	10684	484	F	10200