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				$	280		$	39,250
Technician wages	$	8,400					$	8,250
Mobile lab operating expenses	$	4,600		$	34		$	9,540
Office expenses	$	2,300		$	4		$	2,750
Advertising expenses	$	1,610					$	1,680
Insurance	$	2,870					$	2,870
Miscellaneous expenses	$	960		$	1		$	415

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $34 per job, and the actual mobile lab operating expenses for February were $9,540. The company expected to work 150 jobs in February, but actually worked 158 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	158			158			150
Revenue	39250	4990	U	44240	2240	F	42000
Expenses:
Technician wages	8250	150	F	8400	0	None	8400
Mobile lab operating expenses	9540	432	F	9972	272	U	9700
Office expenses	2750	182	F	2932	32	U	2900
Advertising expenses	1680	70	U	1610	0	None	1610
Insurance	2870	0	None	2870	0	None	2870
Miscellaneous expenses	415	703	F	1118	8	U	1110
Total expenses	25505	1397	F	26902	312	U	26590
Net operating income	13745	3593	U	17338	1928	F	15410