Question

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost...

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 $ 276 $ 30,370
Technician wages $ 8,100 $ 7,950
Mobile lab operating expenses $ 4,700 $ 31 $ 8,260
Office expenses $ 2,200 $ 2 $ 2,290
Advertising expenses $ 1,570 $ 1,640
Insurance $ 2,860 $ 2,860
Miscellaneous expenses $ 960 $ 2 $ 505

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $31 per job, and the actual mobile lab operating expenses for February were $8,260. The company expected to work 120 jobs in February, but actually worked 130 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.)

Homework Answers

Answer #1
Actual results Revenue and spending variances Flexible budget Activity variances Planning budget
Jobs 130 130 120
Revenue 30370 5510 U 35880 2760 F 33120
Expenses:
Technician wages 7950 150 F 8100 0 None 8100
Mobile lab operating expenses 8260 470 F 8730 310 U 8420
Office expenses 2290 170 F 2460 20 U 2440
Advertising expenses 1640 70 U 1570 0 None 1570
Insurance 2860 0 None 2860 0 None 2860
Miscellaneous expenses 505 715 F 1220 20 U 1200
Total expense 23505 1435 F 24940 350 U 24590
Net operating income 6865 4075 U 10940 2410 F 8530
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