Question

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		$	30,490
Technician wages	$	8,200					$	8,050
Mobile lab operating expenses	$	4,600		$	32		$	8,280
Office expenses	$	2,400		$	3		$	2,610
Advertising expenses	$	1,610					$	1,680
Insurance	$	2,890					$	2,890
Miscellaneous expenses	$	980		$	1		$	405

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $32 per job, and the actual mobile lab operating expenses for February were $8,280. The company expected to work 120 jobs in February, but actually worked 124 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

Air Qual Test Corporation Flexible Budget Performance Report For the Month Ended February 28 Actual Flexible Planning Budget Revenue and Activity Variance Results Spending Variance Budget Jobs 124 124 120 Revenue ($277* q) Expenses: Techinician Wages ($8,200) Mobile Lab Operating Expenses ($4,600 $32*q) Office Expenses ($2,400 $3*q) Advertising Expense ($1,610) Insurance ($2,890) Miscellaneous Expense ($980 Total Expenses Net Operating Income 34348 30490 3858 1108 33240 8050 150 F 8200 0 None 8200 288 8280 8568 128 U 8440 + 2610 162 2772 12 U 2760 1680 70 1610 None 1610 2890 None 2890 0 None 2890 $1*q) 1104 1100 405 699 F 4 U 23915 25144 1229 F 144 U 25000 2629 6575 U 9204 964 8240 C