Question

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

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.80
Electricity	$	1,000		$	0.07
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.30
Depreciation	$	8,300
Rent	$	2,100
Administrative expenses	$	1,500		$	0.03

For example, electricity costs are $1,000 per month plus $0.07 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.90 per car washed.

The actual operating results for August appear below.

  

Lavage Rapide Income Statement For the Month Ended August 31
Actual cars washed		8,300
Revenue	$	58,680
Expenses:
Cleaning supplies		7,060
Electricity		1,544
Maintenance		1,470
Wages and salaries		7,520
Depreciation		8,300
Rent		2,300
Administrative expenses		1,646
Total expense		29,840
Net operating income	$	28,840

Required:

Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending 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.) PLEASE SHOW WORK

Answer 1

	Preparing Flexible Budget:
		Fixed Cost	Cost per	Actual Activity=8300
		per Month	Car Washed	Variable Cost(8300* Cost PU)	Fixed Cost	Total Cost
	Cleaning supplies		0.80	6640	0	6640
	Electricity	1,000	0.07	581	1000	1581
	Maintenance		0.15	1245	0	1245
	Wages and salaries	4,700	0.30	2490	4700	7190
	Depreciation	8,300		0	8300	8300
	Rent	2,100		0	2100	2100
	Administrative expenses	1,500	0.03	249	1500	1749
				11205	17600	28805
	Lavage Rapide
	Flexible Budget Performance Report
		Flexible Budget	Actual Results	Variance	U/F
	Actual cars washed	8,300	8,300
	Revenue	57270	58,680	1,410	F
	Expenses:
	Cleaning supplies	6640	7,060	-420	U
	Electricity	1581	1,544	37	F
	Maintenance	1245	1,470	-225	U
	Wages and salaries	7190	7,520	-330	U
	Depreciation	8300	8,300	0	Zero
	Rent	2100	2,300	-200	U
	Administrative expenses	1749	1,646	103	F
	Total expense	28805	29,840	-1,035	U
	Net operating income	28465	28,840	375	F