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 $33 per job, and the actual mobile lab operating expenses for February were $9,360. The company expected to work 140 jobs in February, but actually worked 142 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 $ 277 $ 36,030 Technician wages $ 8,400 $ 8,250 Mobile lab operating expenses $ 4,900 $ 33 $ 9,360 Office expenses $ 2,300 $ 3 $ 2,570 Advertising expenses $ 1,580 $ 1,650 Insurance $ 2,880 $ 2,880 Miscellaneous expenses $ 940 $ 1 $ 385

Explanation / Answer

Flexible budget performance report Planning Budget Flexible Budget Actual results Activity variance Revenue & spending variance A B C A-B B-C (Based on Expected Jobs) (Based on Actual Jobs) Jobs 140 142 Revenue (a) 38780 39334 36030 554 F 3304 U (140*277) (142*277) Expenses: Technician wages 8400 8400 8250 0 150 F Mobile lab operating expenses 9520 9586 9360 66 U 226 F 4900+(33*140) 4900+(33*142) Office expenses 2720 2726 2570 6 U 156 F 2300+(3*140) 2300+(3*142) Advertising expenses 1580 1580 1650 0 70 U Insurance 2880 2880 2880 0 0 Miscellaneous expenses 1080 1082 385 2 U 697 F 940+(1*140) 940+(1*142) Total expenses (b) 26180 26254 25095 74 U 1159 F Net operating income (a)-(b) 12600 13080 10935 480 F 2145 U

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