Question

Exercise 9-17 Flexible Budget Performance Report [LO9-1, LO9-2, LO9-3, LO9-4]

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	$	8,100					$	7,950
Mobile lab operating expenses	$	4,800		$	33		$	9,590
Office expenses	$	2,400		$	2		$	2,550
Advertising expenses	$	1,590					$	1,660
Insurance	$	2,850					$	2,850
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 $4,800 plus $33 per job, and the actual mobile lab operating expenses for February were $9,590. The company expected to work 150 jobs in February, but actually worked 160 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

Solution:

AirQual Test Corporation
Flexible Budget Performance Report
For the month ended February
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Nos of Jobs	160			160			150
Revenue	$38,500.00	$5,500.00	U	$44,000.00	$2,750.00	F	$41,250.00
Expenses:
Technician Wages	$7,950.00	$150.00	F	$8,100.00	$0.00	None	$8,100.00
Mobile lab operating expenses	$9,590.00	$490.00	F	$10,080.00	$330.00	U	$9,750.00
Office expenses	$2,550.00	$170.00	F	$2,720.00	$20.00	U	$2,700.00
Advertising expenses	$1,660.00	$70.00	U	$1,590.00	$0.00	None	$1,590.00
Insurance	$2,850.00	$0.00	None	$2,850.00	$0.00	None	$2,850.00
Miscellenous expenses	$565.00	$715.00	F	$1,280.00	$20.00	U	$1,260.00
Total Expenses	$25,165.00	$1,455.00	F	$26,620.00	$370.00	U	$26,250.00
Net Income	$13,335.00	$4,045.00	U	$17,380.00	$2,380.00	F	$15,000.00