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		$	36,030
Technician wages	$	8,100					$	7,950
Mobile lab operating expenses	$	4,800		$	30		$	8,840
Office expenses	$	2,300		$	3		$	2,570
Advertising expenses	$	1,580					$	1,650
Insurance	$	2,870					$	2,870
Miscellaneous expenses	$	950		$	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 $30 per job, and the actual mobile lab operating expenses for February were $8,840. The company expected to work 140 jobs in February, but actually worked 144 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	144			144			140
Revenue	36030	3858	U	39888	1108	F	38780
Expenses:
Technician wages	7950	150	F	8100	0	None	8100
Mobile lab operating expenses	8840	280	F	9120	120	U	9000
Office expenses	2570	162	F	2732	12	U	2720
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 expenses	24275	1221	F	25496	136	U	25360
Net operating income	11755	2637	U	14392	972	F	13420