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				$	275		$	38,500
Technician wages	$	8,300					$	8,150
Mobile lab operating expenses	$	4,900		$	30		$	9,230
Office expenses	$	2,700		$	3		$	3,000
Advertising expenses	$	1,580					$	1,650
Insurance	$	2,880					$	2,880
Miscellaneous expenses	$	960		$	2		$	565

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,900 plus $30 per job, and the actual mobile lab operating expenses for February were $9,240. The company expected to work 150 jobs in February, but actually worked 154 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.)

	AirQual Test Corporation Flexible Budget Performance Report For the Month Ended February 28 Actual Results Flexible Budget Planning Budget Jobs 154 Revenue $38,500 Expenses: Technician wages 8,150 Mobile lab operating expenses 9,240 Office expenses 3,000 Advertising expenses 1,650 Insurance 2,880 Miscellaneous expenses 565 Total expense 25,485 Net operating income $13,015

Answer 1

		Flexible budget performance report
			Actual	Revenue & spending		Flexible	Activity variance		Static budget
			budget	variance		budget
no of jobs			154			154			150
	Revenue		38,500	3,850	U	42350	1100	F	41250
less:Exoenses
	Technicial wages		8,150	150	F	8,300	0	N	8,300
mobile lab operating expense			9,240	280	F	9520	120	U	9400
office expense			3,000	162	F	3162	12	U	3150
advertising expense			1,650	70	U	1,580	0	N	1,580
insurance			2,880	0	N	2,880	0	N	2,880
miscellaneous expense			565	703	F	1,268	8	U	1,260
total expense			25,485	1,225	F	26,710	140	U	26,570
net operating income			13,015	2,625	U	15,640	960	F	14,680