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 $34 per job, and the actual mobile lab operating expenses for February were $9,500. The company expected to work 140 jobs in February, but actually worked 144 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. ( This report must include - jobs, revenue, expenses: technological wages, mobile lab operating expense, office expense, advertising expense, insurance, and miscellaneous expenses for both flexible and planning budget. (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 $ 279 $ 36,310 Technician wages $ 8,400 $ 8,250 Mobile lab operating expenses $ 4,900 $ 34 $ 9,500 Office expenses $ 2,400 $ 4 $ 2,810 Advertising expenses $ 1,550 $ 1,620 Insurance $ 2,890 $ 2,890 Miscellaneous expenses $ 940 $ 1 $ 385

Explanation / Answer

Flexible Static Fixed Variable budget budget component component no of jobs 144 140 Revenue 279 40176 39060 Technicial wages 8,400 8,400 8,400 mobile lab operating expense 4,900 34 9796 9660 office expense 2,400 4 2976 2960 advertising expense 1,550 1,550 1,550 insurance 2,890 2,890 2,890 miscellaneous expense 940 1 1084 1080 total expense 26,696 26,540 Flexible budget = fixed component + 144 jobs *variable component Static budget    = Fixed component + 140 jobs *variable component Flexible budget performance report Actual Revenue & spending Flexible Activity variance Static budget budget variance budget no of jobs 144 144 140 Revenue 36,310 3,866 U 40176 1116 F 39060 less:Exoenses Technicial wages 8,250 150 F 8,400 0 N 8,400 mobile lab operating expense 9,500 296 F 9796 136 U 9660 office expense 2,810 166 F 2976 16 U 2960 advertising expense 1,620 70 U 1,550 0 N 1,550 insurance 2,890 0 N 2,890 0 N 2,890 miscellaneous expense 385 699 F 1,084 0 N 1,080 total expense 25,455 1,241 F 26,696 156 U 26,540 net operating income 10,855 2,625 U 13,480 960 F 12,520

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