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:

	Fixed Component per Month			Variable Component per Job			Actual Total for February
Revenue				$	277		$	38,800
Technician wages	$	8,500					$	8,350
Mobile lab operating expenses	$	4,700		$	31		$	9,190
Office expenses	$	2,600		$	3		$	2,900
Advertising expenses	$	1,560					$	1,630
Insurance	$	2,900					$	2,900
Miscellaneous expenses	$	930		$	2		$	535

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $31 per job, and the actual mobile lab operating expenses for February were $9,190. The company expected to work 150 jobs in February, but actually worked 160 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February.

Answer 1

Solution:

AirQual Test Corporation
Flexible Budget Performance Report
For the month Ended February 28
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Flights	160			160			150
Revenue	$38,800.00	$5,520.00	U	$44,320.00	$2,770.00	F	$41,550.00
Expenses:
Technical wages	$8,350.00	$150.00	F	$8,500.00	$0.00	None	$8,500.00
Mobile lab operating expenses	$9,190.00	$470.00	F	$9,660.00	$310.00	U	$9,350.00
Office Expenses	$2,900.00	$180.00	F	$3,080.00	$30.00	U	$3,050.00
Advertising Expense	$1,630.00	$70.00	U	$1,560.00	$0.00	None	$1,560.00
Insurance	$2,900.00	$0.00	None	$2,900.00	$0.00	None	$2,900.00
Miscellaneous Expenses	$535.00	$715.00	F	$1,250.00	$20.00	U	$1,230.00
Total expense	$25,505.00	$1,445.00	F	$26,950.00	$360.00	U	$26,590.00
Net Operating Income	$13,295.00	$4,075.00	U	$17,370.00	$2,410.00	F	$14,960.00