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 $ 0.05 Maintenance $ 0.10 Wages and salaries $ 4,400 $ 0.20 Depreciation $ 8,000 Rent $ 2,000 Administrative expenses $ 1,500 $ 0.05 For example, electricity costs are $1,300 per month plus $0.05 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.30 per car washed. The actual operating results for August appear below.

Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,200 Revenue $ 53,130 Expenses: Cleaning supplies 4,550 Electricity 1,675 Maintenance 1,050 Wages and salaries 6,380 Depreciation 8,000 Rent 2,200 Administrative expenses 1,805 Total expense 25,660 Net operating income $ 27,470 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

Solution:

Lavage Rapide
Flexible Budget Performance Report
For the month ended August 31
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Car Washed	8200			8200			8100
Revenue	$53,130.00	$1,470.00	F	$51,660.00	$630.00	F	$51,030.00
Expenses:
Cleaning Supplies	$4,550.00	$450.00	U	$4,100.00	$50.00	U	$4,050.00
Electricity	$1,675.00	$35.00	F	$1,710.00	$5.00	U	$1,705.00
Maintenance	$1,050.00	$230.00	U	$820.00	$10.00	U	$810.00
Wages and Salaries	$6,380.00	$340.00	U	$6,040.00	$20.00	U	$6,020.00
Depreciation	$8,000.00	$0.00	None	$8,000.00	$0.00	None	$8,000.00
Rent	$2,200.00	$200.00	U	$2,000.00	$0.00	None	$2,000.00
Administrative expenses	$1,805.00	$105.00	F	$1,910.00	$5.00	U	$1,905.00
Total Expenses	$25,660.00	$1,080.00	U	$24,580.00	$90.00	U	$24,490.00
Net Operating Income	$27,470.00	$390.00	F	$27,080.00	$540.00	F	$26,540.00