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		$	30,490
Technician wages	$	8,300					$	8,150
Mobile lab operating expenses	$	4,800		$	31		$	8,360
Office expenses	$	2,500		$	4		$	2,830
Advertising expenses	$	1,600					$	1,670
Insurance	$	2,860					$	2,860
Miscellaneous expenses	$	940		$	2		$	485

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 $8,360. The company expected to work 120 jobs in February, but actually worked 130 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

	Actual results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Jobs	130			130			120
Revenue	30490	5520	U	36010	2770	F	33240
Expenses:
Technician wages	8150	150	F	8300	0	None	8300
Mobile lab operating expenses	8360	470	F	8830	310	U	8520
Office expenses	2830	190	F	3020	40	U	2980
Advertising expenses	1670	70	U	1600	0	None	1600
Insurance	2860	0	None	2860	0	None	2860
Miscellaneous expenses	485	715	F	1200	20	U	1180
Total expense	24355	1455	F	25810	370	U	25440
Net operating income	6135	4065	U	10200	2400	F	7800