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 $4,500 plus $32 per job, and the actual mobile lab operating expenses for February were $7,860. The company expected to work 110 jobs in February, but actually worked 112 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 $ 279 $ 27,940 Technician wages $ 8,200 $ 8,050 Mobile lab operating expenses $ 4,500 $ 32 $ 7,860 Office expenses $ 2,800 $ 2 $ 2,870 Advertising expenses $ 1,570 $ 1,640 Insurance $ 2,880 $ 2,880 Miscellaneous expenses $ 950 $ 2 $ 475

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Jobs worked 112 112 110 Revenue 27940 3308 U 31248 558 F 30690 Expenses: Technician wages 8050 150 F 8200 0 None 8200 Mobile lab operating expenses 7860 224 F 8084 64 U 8020 Office expenses 2870 154 F 3024 4 U 3020 Advertising expenses 1640 70 U 1570 0 None 1570 Insurance 2880 0 None 2880 0 None 2880 Miscellaneous expenses 475 699 F 1174 4 U 1170 Total expense 23775 1157 F 24932 72 U 24860 Net operating income 4165 2151 U 6316 486 F 5830

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