AirQual Test Corporation provides on-site air quality testing services. The comp

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 Februarv: Variable $276 31 Fixed Component per Month Actual Total Component per Job for February Revenue Technician wages Mobile lab operating expenses Office expenses Advertising expenses Insurance Miscellaneous expenses $ 8,500 $ 4,500 $ 2,800 $ 1,560 $2,870 $930 $ 27,616 $8,350 $ 7,750 $2,980 $1,630 $2,870 $345 The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,500 plus $31 per job, and the actual mobile lab operating expenses for February were $7,750. The company expected to work 110 jobs in February, but actually worked 120 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.)

Explanation / Answer

Flexible Static Fixed Variable budget budget component component no of jobs 120 110 Revenue 276 33120 30360 Technicial wages 8,500 8,500 8,500 mobile lab operating expense 4,500 31 8220 7910 office expense 2,800 3 3160 3130 advertising expense 1,500 1,500 1,500 insurance 2,870 2,870 2,870 miscellaneous expense 930 1 1050 1040 total expense 21100 35 25,300 24,950 Flexible budget = fixed component + 138 jobs *variable component Static budget    = Fixed component + 130 jobs *variable component Flexible budget performance report Actual Revenue & spending Flexible Activity variance Static budget budget variance budget no of jobs 120 120 110 Revenue 27,610 5,510 U 33120 2760 F 30360 less:Exoenses Technicial wages 8,350 150 F 8,500 0 N 8,500 mobile lab operating expense 7,750 470 F 8220 310 U 7910 office expense 2,980 180 F 3160 30 U 3130 advertising expense 1,630 130 U 1,500 0 N 1,500 insurance 2,870 0 N 2,870 0 N 2,870 miscellaneous expense 345 705 F 1,050 10 U 1,040 total expense 23,925 1,375 F 25,300 350 U 24,950 net operating income 3,685 4,135 U 7,820 2,410 F 5,410

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