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				$	0.40
Electricity	$	1,500		$	0.08
Maintenance				$	0.10
Wages and salaries	$	4,800		$	0.30
Depreciation	$	8,300
Rent	$	1,900
Administrative expenses	$	1,700		$	0.01

For example, electricity costs are $1,500 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.70 per car washed.

The actual operating results for August appear below.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,500
Revenue	$	58,380
Expenses:
Cleaning supplies		3,860
Electricity		2,142
Maintenance		1,080
Wages and salaries		7,680
Depreciation		8,300
Rent		2,100
Administrative expenses		1,684
Total expense		26,846
Net operating income	$	31,534

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.)

Answer 1