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 $ 27,720 Technician wages $ 8,400 $ 8,250 Mobile lab operating expenses $ 4,700 $ 30 $ 7,840 Office expenses $ 2,700 $ 2 $ 2,770 Advertising expenses $ 1,610 $ 1,680 Insurance $ 2,850 $ 2,850 Miscellaneous expenses $ 920 $ 2 $ 445 The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $30 per job, and the actual mobile lab operating expenses for February were $7,840. The company expected to work 110 jobs in February, but actually worked 112 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	112			112			110
Revenue	27720	3304	U	31024	554	F	30470
Expenses:
Technician wages	8250	150	F	8400	0	None	8400
Mobile lab operating expenses	7840	220	F	8060	60	U	8000
Office expenses	2770	154	F	2924	4	U	2920
Advertising expenses	1680	70	U	1610	0	None	1610
Insurance	2850	0	None	2850	0	None	2850
Miscellaneous expenses	445	699	F	1144	4	U	1140
Total expense	23835	1153	F	24988	68	U	24920
Net operating income	3885	2151	U	6036	486	F	5550