AirQual Test Corporation provides on-site air quality testing services. The comp
ID: 2720043 • Letter: A
Question
AirQual Test Corporation provides on-site air quality testing services. The company has provided the following data concerning its operations.
Fixed Component per Month
Variable Component per job
Actual Total for February
Revenue
$276
$35,890
Technician Wages
$8,400
$8,250
Mobile lab Operating Expenses
$4,800
$28
$8,880
Office expenses
$2,300
$3
$2,570
Advertising expenses
$1,560
$1,630
Insurance
$2,850
$2,850
Miscellaneous expenses
$930
$2
$515
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $28 per job, and the actual mobile lab operating expenses for February were $8,880. The company expected to work 140 jobs in February, but actually worked 134 jobs.
Required:
Complete the flexible budget performance report showing AirQual Test Corporations 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.)
AirQual Test Corporation
Flexible Budget Performance Report
For the Monthe ended February 28
Revenue & Spending Variances
Activity Variances
Revenue
Expenses:
Technician Wages
Mobile lab Operating expenses
Office expenses
Advertising expenses
Insurance
Miscellaneous expenses
Total expense
Net operating income
Fixed Component per Month
Variable Component per job
Actual Total for February
Revenue
$276
$35,890
Technician Wages
$8,400
$8,250
Mobile lab Operating Expenses
$4,800
$28
$8,880
Office expenses
$2,300
$3
$2,570
Advertising expenses
$1,560
$1,630
Insurance
$2,850
$2,850
Miscellaneous expenses
$930
$2
$515
Explanation / Answer
Solution :
Revenue & Spending Variances
Activity Variances
Revenue
2750
Unfavourable
1656
Unfavourable
Expenses:
Technician Wages
150
favourable
0
none
Mobile lab Operating expenses
-160
Unfavourable
168
favourable
Office expenses
150
favourable
18
favourable
Advertising expenses
-70
Unfavourable
0
none
Insurance
0
none
0
none
Miscellaneous expenses
695
favourable
12
favourable
Total expense
765
Unfavourable
198
favourable
Net operating income
1985
Unfavourable
1458
Unfavourable
Variance formula= (standard job - actual job worked)xvariable component +fixed component – actual total
for Revenue/income Positive number represents unfavourable variance
for expense Positive number represents favourable variance and vice versa
Revenue & Spending Variances
Activity Variances
Revenue
2750
Unfavourable
1656
Unfavourable
Expenses:
Technician Wages
150
favourable
0
none
Mobile lab Operating expenses
-160
Unfavourable
168
favourable
Office expenses
150
favourable
18
favourable
Advertising expenses
-70
Unfavourable
0
none
Insurance
0
none
0
none
Miscellaneous expenses
695
favourable
12
favourable
Total expense
765
Unfavourable
198
favourable
Net operating income
1985
Unfavourable
1458
Unfavourable
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