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 $2,900 plus $35 per job, and the actual mobile lab operating expenses for February were $4,530. The company expected to work 50 jobs in February, but actually worked 52 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 $ 360 $ 18,950 Technician wages $ 6,400 $ 6,450 Mobile lab operating expenses $ 2,900 $ 35 $ 4,530 Office expenses $ 2,600 $ 2 $ 3,050 Advertising expenses $ 970 $ 995 Insurance $ 1,680 $ 1,680 Miscellaneous expenses $ 500 $ 3 $ 465

Explanation / Answer

AirQual Test Corporation

Flexible Budget Performance Report

For the Month Ended February 28

Actual Results

Revenue and Spending Variances

Flexible Budget

Activity Variance

Planning Budget

Jobs (q)

52

52

50

Revenue ($360.00q)

18950

230

F

18720

720

F

18000

Expenses:

Technician wages ($6,400)

6450

50

U

6400

0

6400

Mobile lab operating expenses ($2,900 + $35.00q)

4530

190

F

4720

70

U

4650

Office expenses ($2,600 + $2.00q)

3050

346

U

2704

4

U

2700

Advertising expenses ($970)

995

25

U

970

0

970

Insurance ($1,680)

1680

0

1680

0

1680

Miscellaneous expenses ($500 + $3.00q)

465

191

F

656

6

U

650

Total expense

17170

40

U

17130

80

U

17050

Net operating income.

$1780

$190

F

$1590

$640

F

$950

Actual Results

Revenue and Spending Variances

Flexible Budget

Activity Variance

Planning Budget

Jobs (q)

52

52

50

Revenue ($360.00q)

18950

230

F

18720

720

F

18000

Expenses:

Technician wages ($6,400)

6450

50

U

6400

0

6400

Mobile lab operating expenses ($2,900 + $35.00q)

4530

190

F

4720

70

U

4650

Office expenses ($2,600 + $2.00q)

3050

346

U

2704

4

U

2700

Advertising expenses ($970)

995

25

U

970

0

970

Insurance ($1,680)

1680

0

1680

0

1680

Miscellaneous expenses ($500 + $3.00q)

465

191

F

656

6

U

650

Total expense

17170

40

U

17130

80

U

17050

Net operating income.

$1780

$190

F

$1590

$640

F

$950

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