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				$	279		$	33,520
Technician wages	$	8,500					$	8,350
Mobile lab operating expenses	$	4,500		$	32		$	8,500
Office expenses	$	2,300		$	3		$	2,540
Advertising expenses	$	1,590					$	1,660
Insurance	$	2,860					$	2,860
Miscellaneous expenses	$	920		$	1		$	355

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,500 plus $32 per job, and the actual mobile lab operating expenses for February were $8,500. The company expected to work 130 jobs in February, but actually worked 138 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	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Jobs worked	138			138			130
Revenue	33520	4982	U	38502	2232	F	36270
Expenses:
Technician wages	8350	150	F	8500	0	None	8500
Mobile lab operating expenses	8500	416	F	8916	256	U	8660
Office expenses	2540	174	F	2714	24	U	2690
Advertising expenses	1660	70	U	1590	0	NOne	1590
Insurance	2860	0	None	2860	0	NOne	2860
Miscellaneous expenses	355	703	F	1058	8	U	1050
Total expenses	24265	1373	F	25638	288	U	25350
Net operating income	9255	3609	U	12864	1944	F	10920