Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for 35,000 customers, but actually served 34,000 customers. The company revenue and spending variances listed in the table below. Explain which variances should be of concern for management?

	Actual Results		Revenue and Spending Variances				Flexible Budget
Customers served (q)		34,000							34,000
Revenue ($3.50q)	$	119,800		$	800	F		$	119,000
Expenses:
Wages and salaries ($33,200 + $1.10q)		68,000			2,600	F			70,600
Supplies ($0.50q)		14,400			2,600	F			17,000
Insurance ($10,400)		10,400			0				10,400
Miscellaneous expense ($6,400 + $0.30q)		17,700			1,100	U			16,600
Total expense		110,500			4,100	F			114,600

Net operating income

$ 9,300

$ 4,900 F

$ 4,400