Question

CH9ALG2

Air Qual 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: Fixed Component per Month Revenue Technician wages Mobile lab operating expenses Office expenses Advertising expenses Insurance Miscellaneous expenses $ 8,109 $ 4,500 $ 2,200 $ 1,580 $ 2,880 $ 970 Variable Actual Total Component per Job for February $ 275 $ 35,750 $ 7,950 $ 30 $ 8,540 $ 2 $ 2,330 $ 1,650 $ 2,880 $ 1 $ 415 The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,500 plus $30 per job, and the actual mobile lab operating expenses for February were $8,540. The company expected to work 140 jobs in February, but actually worked 148 jobs. Required: Prepare a flexible budget performance report showing Air Qual 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.) AirQual Test Corporation Flexible Budget Performance Report For the Month Ended February 28 Actual Flexible Results Budget Planning Budget Jobs 148 $ 35,750 Revenue Expenses: Technician wages Mobile lab operating expenses Office expenses Advertising expenses 7,950 8,540 2,330 1,650 2,880 415| 23,765 | 11,985 Insurance | Miscellaneous expenses Total expense Net operating income | | | | $

Answer 1

Solution:

AirQual Test Corporation
Flexible Budget Performance Report
For the month ended February
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Nos of Jobs	148			148			140
Revenue	$35,750.00	$4,950.00	U	$40,700.00	$2,200.00	F	$38,500.00
Expenses:
Technician Wages	$7,950.00	$150.00	F	$8,100.00	$0.00	None	$8,100.00
Mobile lab operating expenses	$8,540.00	$400.00	F	$8,940.00	$240.00	U	$8,700.00
Office expenses	$2,330.00	$166.00	F	$2,496.00	$16.00	U	$2,480.00
Advertising expenses	$1,650.00	$70.00	U	$1,580.00	$0.00	None	$1,580.00
Insurance	$2,880.00	$0.00	None	$2,880.00	$0.00	None	$2,880.00
Miscellenous expenses	$415.00	$703.00	F	$1,118.00	$8.00	U	$1,110.00
Total Expenses	$23,765.00	$1,349.00	F	$25,114.00	$264.00	U	$24,850.00
Net Income	$11,985.00	$3,601.00	U	$15,586.00	$1,936.00	F	$13,650.00