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Exercise 9-17 Flexible Budget Performance Report [LO9-1, LO9-2, LO9-3, LO9-4] AirQual Test Corporation provides on-site air...

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 $ 8,200 $ 8,050
Mobile lab operating expenses $ 4,800 $ 35 $ 9,890
Office expenses $ 2,300 $ 4 $ 2,750
Advertising expenses $ 1,580 $ 1,650
Insurance $ 2,870 $ 2,870
Miscellaneous expenses $ 940 $ 1 $ 395

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $35 per job, and the actual mobile lab operating expenses for February were $9,890. The company expected to work 150 jobs in February, but actually worked 154 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.)

AirQual Test Corporation
Flexible Budget Performance Report
For the Month Ended February 28
Actual Results activity variance Flexible Budget revenue and spending variance Planning Budget
Jobs 154                                
Revenue $38,500
Expenses:
Technician wages 8,050
Mobile lab operating expenses 9,890
Office expenses 2,750
Advertising expenses 1,650
Insurance 2,870
Miscellaneous expenses 395
Total expense 25,605
Net operating income $12,895

Homework Answers

Answer #1
Actual results Revenue and spending variances Flexible budget Activity variances Planning budget
Jobs 154 154 150
Revenue 38500 3850 U 42350 1100 F 41250
Expenses:
Technician wages 8050 150 F 8200 0 None 8200
Mobile lab operating expenses 9890 300 F 10190 140 U 10050
Office expenses 2750 166 F 2916 16 U 2900
Advertising expenses 1650 70 U 1580 0 None 1580
Insurance 2870 0 None 2870 0 None 2870
Miscellaneous expenses 395 699 F 1094 4 U 1090
Total expense 25605 1245 F 26850 160 U 26690
Net operating income 12895 2605 U 15500 940 F 14560
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