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		$	27,610
Technician wages	$	8,200					$	8,050
Mobile lab operating expenses	$	4,800		$	31		$	8,050
Office expenses	$	2,500		$	3		$	2,680
Advertising expenses	$	1,590					$	1,660
Insurance	$	2,870					$	2,870
Miscellaneous expenses	$	950		$	1		$	365
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $31 per job, and the actual mobile lab operating expenses for February were $8,050. The company expected to work 110 jobs in February, but actually worked 112 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 REPORT
For the month ended February
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	-3302	Unfavorable	552	Favorable
Less:-Expenses
Technician wages	150	Favorable	0	None
Mobile lab operating expense	222	Favorable	-62	Unfavorable
Office expenses	156	Favorable	-6	Unfavorable
Advertising expenses	-70	Unfavorable	0	None
Insurance	0	None	0	None
Miscellaneous expenses	697	Favorable	-2	Unfavorable
Total Expenses	1155	Favorable	-70	Unfavorable
Net Operating Income	-2147	Unfavorable	482	Favorable

Explanation-

AirQual Test Corporation
Revenue & Spending Variances
For the month ended February 28
Particulars	Flexible Budget	Actual Results	Variances	Remark
	$	$	$
Revenue	112 jobs*$276 per job =$30912	27610	-3302	Unfavorable
Less:-Expenses
Technician wages	$8200	8050	150	Favorable
Mobile lab operating expense	(112 jobs*$31 per job)+$4800 =$8272	8050	222	Favorable
Office expenses	(112 jobs*$3 per job)+$2500 =$2836	2680	156	Favorable
Advertising expenses	$1590	1660	-70	Unfavorable
Insurance	$2870	2870	0	None
Miscellaneous expenses	(112 jobs*$1 per job)+$950 =$1062	365	697	Favorable
Total Expenses	24830	23675	1155	Favorable
Net Operating Income	6082	3935	-2147	Unfavorable
AirQual Test Corporation
Activity Variances
For the month ended February 28
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	110 jobs*$276 per job =$30360	112 jobs*$276 per job =$30912	552	Favorable
Less:-Expenses
Technician wages	$8200	$8200	0	None
Mobile lab operating expense	(110 jobs*$31 per job)+$4800 =$8210	(112 jobs*$31 per job)+$4800 =$8272	-62	Unfavorable
Office expenses	(110 jobs*$3 per job)+$2500 =$2830	(112 jobs*$3 per job)+$2500 =$2836	-6	Unfavorable
Advertising expenses	$1590	$1590	0	None
Insurance	$2870	$2870	0	None
Miscellaneous expenses	(110 jobs*$1 per job)+$950 =$1060	(112 jobs*$1 per job)+$950 =$1062	-2	Unfavorable
Total Expenses	24760	24830	-70	Unfavorable
Net Operating Income	5600	6082	482	Favorable