Question

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the company’s costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.70
Electricity	$	1,400		$	0.08
Maintenance				$	0.10
Wages and salaries	$	4,100		$	0.40
Depreciation	$	8,300
Rent	$	2,200
Administrative expenses	$	1,700		$	0.05

For example, electricity costs should be $1,400 per month plus $0.08 per car washed. The company actually washed 8,200 cars in August and collected an average of $6.50 per car washed.

Required:

Prepare the company’s flexible budget for August.

Answer 1

Answer
Explanation :
Lavage Rapide
Flexible Budget
Company’s flexible budget for August
Actual cars washed	8,200
Revenue (8,200 cars x $6.50 per car)	$        53,300
Expenses:
Cleaning supplies (8,200 cars x $0.70 per car)	$          5,740
Electricity ($1,400 + 8,200 cars x $0.08 per car)	$          2,056
Maintenance (8,200 cars x $0.10 per car)	$             820
Wages and salaries ($4,100 + 8,600 cars x $0.30 per car)	$          7,540
Depreciation	$          8,300
Rent	$          2,200
Administrative expenses ($1,700 + 8,200 cars x $0.05 per car)	$          2,110
Total expense	$        28,766
Net operating income (Revenue - Total expense)	$        24,534