Question

Exercise 9-17 Flexible Budget Performance Report [LO9-1, LO9-2, LO9-3, LO9-4]

Answer 1

Answer:

AirQual Test Corporation

Flexible Budget Performance Report for February:

                                           Fixed        Variable    Flexible     Actual

                                     Component                     Budget      Total

Revenue                                               $ 275     $38,500  $ 38,500   0 None

Technician wages              $ 8,100                       $8,100     $ 7,950  150 F

Mobile lab operating

 expenses                         $4,800       $ 33     $10,080     $ 9,590  490 F

Office expenses              $ 2,400         $ 2       $2,720    $ 2,550    170 F

Advertising expenses      $1,590                       $1,590     $ 1,660     70 U

Insurance                        $ 2,850                      $2,850    $ 2,850       0 None

Miscellaneous expenses  $ 960         $ 2        $1,280       $ 565    715 F

Explanation:

                                   Fixed Component    Variable    Budget      Actual

Revenue                                                        $ 275     $41,250   $ 38,500

Technician wages              $ 8,100                               $8,100      $ 7,950

Mobile lab operating

 expenses                         $4,800                 $ 33      $9,750     $ 9,590

Office expenses              $ 2,400                   $ 2       $2,700    $ 2,550

Advertising expenses      $1,590                                 $1,590     $ 1,660

Insurance                        $ 2,850                                $2,850    $ 2,850

Miscellaneous expenses  $ 960                   $ 2        $1,260       $ 565

b) Variable elements for the flexible budget:

1) Mobile lab operating expenses = $4,800 + ($33 x 160) =  $10,080

2) Office Expenses = $2,400 + ($2 x 160) = $2,720

3) Miscellaneous expenses = $960 + ($2 x 160) = $1,280

c) A flexible budget is a budget that is flexed with regard to the volume of activity, with respect to the variable elements.  This budget type changes in value as a result of the changes in the volume of activity.  It is different from a static budget, which does not change in value following the level of activity and does not account for changing incomes and expenses.