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		$	33,260
Technician wages	$	8,600					$	8,450
Mobile lab operating expenses	$	4,800		$	31		$	8,670
Office expenses	$	2,700		$	3		$	2,940
Advertising expenses	$	1,550					$	1,620
Insurance	$	2,860					$	2,860
Miscellaneous expenses	$	940		$	2		$	505

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $31 per job, and the actual mobile lab operating expenses for February were $8,670. The company expected to work 130 jobs in February, but actually worked 136 jobs.

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

Flexible Budget performance report is as prepared below:

AirQual Test Corporation
Flexible Budget Performance Report
For the month ended February 28
Particulars	Actual Results	Revenue and spending variances		Flexible Budget	Activity variances		Planning Budget
	A	B		C	D		E
		A-C			C-E
Jobs = q	$136			136			130
Revenue (277 q)	33,260	($4,412)	U	37,672	1,662	F	36,010
Expenses:
Technician wages	8,450	($150)	F	8,600	0	None	8,600
Mobile lab operating expenses (4,800+31q)	8,670	($346)	F	9,016	186	U	8,830
Office expense (2,700+3q)	2,940	($168)	F	3,108	18	U	3,090
Advertising expenses	1,620	$70	U	1,550	0	None	1,550
Insurance	2,860	$0	None	2,860	0	None	2,860
Miscellaneous expenses (940+2q)	$505	($707)	F	1,212	12	U	1,200
Total expense	25,045	($1,301)	F	26,346	216	U	26,130
Net Operating Income	8,215	($3,111)	U	11,326	1,446	F	9,880