Question

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

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.50
Electricity	$	1,300		$	0.07
Maintenance				$	0.15
Wages and salaries	$	4,000		$	0.20
Depreciation	$	8,100
Rent	$	1,900
Administrative expenses	$	1,400		$	0.02

For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.40 per car washed.

The actual operating results for August appear below.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,600
Revenue	$	56,500
Expenses:
Cleaning supplies		4,750
Electricity		1,865
Maintenance		1,515
Wages and salaries		6,060
Depreciation		8,100
Rent		2,100
Administrative expenses		1,470
Total expense		25,860
Net operating income	$	30,640

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (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.)

Lavage Rapide Flexible Budget Performance Report For the Month Ended August 31 Actual Results Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget Cars washed 8,600 8,600 Revenue $56,500 Expenses: Cleaning supplies 4,750 Electricity 1,865 Maintenance 1,515 Wages and salaries 6,060 Depreciation 8,100 Rent 2,100 Administrative expenses 1,470 Total expense 25,860 Net operating income $30,640

Answer 1

Flexible Budget Performanc Report
	Actual	Revenue and Spending Variance		Flexible Budget	Activitiy Variance		Planned Budget
Revenue	56,500	1460	F	55,040	640	F	54,400
Expenses:
Cleaning supplies	4,750	450	U	4,300	50	U	4,250
Electricity	1,865	37	F	1,902	7	U	1,895
Maintenance	1,515	225	U	1,290	15	U	1,275
Wages and salaries	6,060	340	U	5,720	20	U	5,700
Depreciation	8,100	0	None	8,100	0	None	8,100
Rent	2,100	200	U	1,900	0	None	1,900
Administrative expenses	1,470	102	F	1,572	2	U	1,570
Total expense	25,860	1076	U	24,784	94	U	24,690
Net operating income	30,640	384	F	30,256	546	F	29,710

Flexible Budget
Actual cars washed	8,600
Revenue 8600*6.40	55,040
Expenses:
Cleaning supplies 8600*.50	4,300
Electricity 1400+8600*.07	1,902
Maintenance 8600*.15	1,290
Wages and salaries 4000+8600*.20	5,720
Depreciation	8,100
Rent	1,900
Administrative expenses   1400+8600*.02	1,572
Total expense	24,784
Net operating income	30,256
Planned Budget
Actual cars washed	8,500
Revenue 8500*6.40	54,400
Expenses:
Cleaning supplies 8500*.50	4,250
Electricity 1400+8500*.07	1,895
Maintenance 8500*.15	1,275
Wages and salaries 4000+8500*.20	5,700
Depreciation	8,100
Rent	1,900
Administrative expenses   1400+8500*.02	1,570
Total expense	24,690
Net operating income	29,710