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		$	27,940
Technician wages	$	8,500					$	8,350
Mobile lab operating expenses	$	4,900		$	31		$	8,150
Office expenses	$	2,400		$	3		$	2,580
Advertising expenses	$	1,570					$	1,640
Insurance	$	2,870					$	2,870
Miscellaneous expenses	$	960		$	1		$	375

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,900 plus $31 per job, and the actual mobile lab operating expenses for February were $8,150. The company expected to work 110 jobs in February, but actually worked 114 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	114			114			110
Revenue	27940	3866	U	31806	1116	F	30690
Expenses:
Technician wages	8350	150	F	8500	0	None	8500
Mobile lab operating expenses	8150	284	F	8434	124	U	8310
Office expenses	2580	162	F	2742	12	U	2730
Advertising expenses	1640	70	U	1570	0	None	1570
Insurance	2870	0	None	2870	0	None	2870
Miscellaneous expenses	375	699	F	1074	4	U	1070
Total expenses	23965	1225	F	25190	140	U	25050
Net operating income	3975	2641	U	6616	976	F	5640