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	$	8,200					$	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

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