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				$	279		$	39,100
Technician wages	$	8,200					$	8,050
Mobile lab operating expenses	$	4,700		$	34		$	9,640
Office expenses	$	2,400		$	3		$	2,700
Advertising expenses	$	1,550					$	1,620
Insurance	$	2,860					$	2,860
Miscellaneous expenses	$	980		$	2		$	585

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $34 per job, and the actual mobile lab operating expenses for February were $9,640. The company expected to work 150 jobs in February, but actually worked 152 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February

Answer 1

Answer:-

AirQual Test Corporation
Revenue & Spending Variances
For the month ended February
Particulars	Flexible Budget	Actual Results	Variances	Remark
	$	$	$
Revenue	152 jobs*279 per job =42408	39100	-3308	Unfavourable
Less:-Expenses
Technician wages	8200	8050	150	Favourable
Mobile lab operating expense	(152 jobs*34 per job)+4700 =9868	9640	228	Favourable
Office expenses	(152 jobs*3 per job)+2400 =2856	2700	156	Favourable
Advertising expenses	1550	1620	-70	Unfavourable
Insurance	2860	2860	0	Favourable
Miscellaneous expenses	(152 jobs*2 per job)+980 =1284	585	699	Unfavourable
Total Expenses	26618	25455
Net Operating Income	15790	13645	-2145	Unfavourable

AirQual Test Corporation
Activity Variances
For the month ended February
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	150 jobs*279 per job =41850	42408	558	Favourable
Less:-Expenses
Technician wages	8200	8200	0	Favourable
Mobile lab operating expense	(150 jobs*34 per job)+4700 =9800	9868	-68	Unfavourable
Office expenses	(150 jobs*3 per job)+2400 =2850	2856	-6	Unfavourable
Advertising expenses	1550	1550	0	None
Insurance	2860	2860	0	None
Miscellaneous expenses	(150 jobs*2 per job)+980 =1280	1284	-4	Unfavourable
Total Expenses	26540	26618
Net Operating Income	15310	15790	480	Favourable