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 February:

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,900 plus $30 per job, and the actual mobile lab operating expenses for February were $8,640. The company expected to work 130 jobs in February, but actually worked 138 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.)

Fixed Component
per Month Variable
Component per Job Actual Total
for February Revenue $ 278 $ 33,390 Technician wages $ 8,300 $ 8,150 Mobile lab operating expenses $ 4,900 $ 30 $ 8,640 Office expenses $ 2,400 $ 3 $ 2,640 Advertising expenses $ 1,610 $ 1,680 Insurance $ 2,900 $ 2,900 Miscellaneous expenses $ 940 $ 2 $ 505

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Jobs 138 138 130 Revenue 33390 4974 U 38364 2224 F 36140 Expenses: Technician wages 8150 150 F 8300 0 None 8300 Mobile lab operating expenses 8640 400 F 9040 240 U 8800 Office expenses 2640 174 F 2814 24 U 2790 Advertising expenses 1680 70 U 1610 0 None 1610 Insurance 2900 0 None 2900 0 None 2900 Miscellaneous expenses 505 711 F 1216 16 U 1200 Total expenses 24515 1365 F 25880 280 U 25600 Net operating income 8875 3609 U 12484 1944 F 10540

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