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				$	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.)

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