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				$	277		$	36,030
Technician wages	$	8,400					$	8,250
Mobile lab operating expenses	$	4,900		$	33		$	9,360
Office expenses	$	2,300		$	3		$	2,570
Advertising expenses	$	1,580					$	1,650
Insurance	$	2,880					$	2,880
Miscellaneous expenses	$	940		$	1		$	385

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,900 plus $33 per job, and the actual mobile lab operating expenses for February were $9,360. The company expected to work 140 jobs in February, but actually worked 142 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

		Flexible budget performance report
				Planning Budget	Flexible Budget	Actual results	Activity variance		Revenue & spending variance
				A	B	C	A-B		B-C
				(Based on Expected Jobs)	(Based on Actual Jobs)
	Jobs			140	142
	Revenue (a)			38780	39334	36030	554	F	3304	U
				(140*277)	(142*277)
	Expenses:
	Technician wages			8400	8400	8250	0		150	F
	Mobile lab operating expenses			9520	9586	9360	66	U	226	F
				4900+(33*140)	4900+(33*142)
	Office expenses			2720	2726	2570	6	U	156	F
				2300+(3*140)	2300+(3*142)
	Advertising expenses			1580	1580	1650	0		70	U
	Insurance			2880	2880	2880	0		0
	Miscellaneous expenses			1080	1082	385	2	U	697	F
				940+(1*140)	940+(1*142)
	Total expenses (b)			26180	26254	25095	74	U	1159	F
	Net operating income (a)-(b)			12600	13080	10935	480	F	2145	U