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				$	276		$	30,370
Technician wages	$	8,100					$	7,950
Mobile lab operating expenses	$	4,600		$	35		$	8,640
Office expenses	$	2,700		$	3		$	2,910
Advertising expenses	$	1,620					$	1,690
Insurance	$	2,860					$	2,860
Miscellaneous expenses	$	940		$	2		$	485

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $35 per job, and the actual mobile lab operating expenses for February were $8,640. 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

	Actual	Revenue/Spending Variance		Flexible Budget	Activity Variance		Planned Budget
Revenue	30370	3854	U	34224	1104	F	33120
Expenses:
Technical wages	7950	150	F	8100	0	None	8100
Mobile lab operating expenses	8640	300	F	8940	140	U	8800
Office expenses	2910	162	F	3072	12	U	3060
Advertising expenses	1690	70	U	1620	0	None	1620
Insurance	2860	0	None	2860	0	None	2860
Miscellaneous expenses	485	703	F	1188	8	U	1180
Total Expenses	24535	1245	F	25780	160	U	25620
Net income	5835	2609	U	8444	944	F	7500

Calculations:

	Flexible Budget			Planned Budget
Jobs			124			120
Revenue		(124 x $276)	34224	(120 x $276)		33120
Expenes:	Fixed	Variable	Total	Fixed	Variable	Total
Technicial wages	8100		8100	8100		8100
Mobile lab operating expenses	4600	(124 x $35)	8940	4600	(120 x $35)	8800
Office expenses	2700	(124 x $3)	3072	2700	(120 x $3)	3060
Advertising expenses	1620		1620	1620		1620
Insurance	2860		2860	2860		2860
Miscellaneous expenses	940	(124 x $2)	1188	940	(120 x $2)	1180
Total Expenses			25780			25620