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 $8,500. 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 $ 279 $ 33,520 Technician wages $ 8,500 $ 8,350 Mobile lab operating expenses $ 4,500 $ 32 $ 8,500 Office expenses $ 2,300 $ 3 $ 2,540 Advertising expenses $ 1,590 $ 1,660 Insurance $ 2,860 $ 2,860 Miscellaneous expenses $ 920 $ 1 $ 355

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Jobs worked 138 138 130 Revenue 33520 4982 U 38502 2232 F 36270 Expenses: Technician wages 8350 150 F 8500 0 None 8500 Mobile lab operating expenses 8500 416 F 8916 256 U 8660 Office expenses 2540 174 F 2714 24 U 2690 Advertising expenses 1660 70 U 1590 0 NOne 1590 Insurance 2860 0 None 2860 0 NOne 2860 Miscellaneous expenses 355 703 F 1058 8 U 1050 Total expenses 24265 1373 F 25638 288 U 25350 Net operating income 9255 3609 U 12864 1944 F 10920

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