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		$	30,730
Technician wages	$	8,500					$	8,350
Mobile lab operating expenses	$	4,800		$	32		$	8,480
Office expenses	$	2,800		$	2		$	2,890
Advertising expenses	$	1,600					$	1,670
Insurance	$	2,900					$	2,900
Miscellaneous expenses	$	960		$	1		$	385

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $32 per job, and the actual mobile lab operating expenses for February were $8,480. The company expected to work 120 jobs in February, but actually worked 126 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

Answer:-

AirQual Test Corporation
Flexible Budget Performance Budget
For the month ended February
Particulars	Actual Results	Revenue & Spending variance	Remark	Flexible Budget	Activity Variance	Reamrk	Planning Budget
Jobs	126			126			120
	$	$		$	$		$
Revenue	30730	-4424	U	126 jobs*279 per job =35154	1674	F	120 jobs*279 per job =33480
Less:- Expenses
Technician wages	8350	150	F	8500	0		8500
Mobile lab operating expense	8480	352	F	(126 jobs*32 per job)+4800 =8832	-192	U	(120 jobs*32 per job)+4800 =8640
Office expenses	2890	162	F	(126 jobs*2 per job)+2800 =3052	-12	U	(120 jobs*2 per job)+2800 =3040
Advertising expenses	1670	-70	U	1600	0	NONE	1600
Insurance	2900	0	NONE	2900	0	NONE	2900
Miscellaneous expenses	385	701	F	(126 jobs*1 per job)+960 =1086	-6	U	(120 jobs*1 per job)+960 =1080
Total Expenses	24675		F	25970			25760
Net Operating Income	6055	-3129	U	9184	1464	F	7720