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				$	0.50
Electricity	$	1,100		$	0.06
Maintenance				$	0.10
Wages and salaries	$	5,000		$	0.30
Depreciation	$	8,200
Rent	$	1,900
Administrative expenses	$	1,600		$	0.01

For example, electricity costs are $1,100 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.80 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	$	59,220
Expenses:
Cleaning supplies		4,700
Electricity		1,574
Maintenance		1,080
Wages and salaries		7,880
Depreciation		8,200
Rent		2,100
Administrative expenses		1,584
Total expense		27,118
Net operating income	$	32,102

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.)

Answer 1

Ans:

Lavage Rapide
Flexible Budget Performance Report
For the Month Ended August 31
	Revenue and Spending variances		Activity Variances
Cars Washed
Revenue ( 6.8*q)	1,420	F	680	F
Expenses:
Cleaning Supplies ( + 0.5q)	450	U	50	U
Electricity ( 1100 + 0.06q)	36	F	6	U
Maintenance ( + 0.1q)	230	U	10	U
Wages and salaries ( 5000 + 0.3q)	330	U	30	U
Depreciation ( 8200 + 0q)	0	NA	0	NA
Rent ( 1900 + 0q)	200	U	0	NA
Administrative Expenses ( 1600 + 0.1q)	866	F	10	U
Total expense	308	U	106	U
Net operating income	1,112	F	574	F

Lavage Rapide
Flexible Budget Performance Report
For the Month Ended August 31
	Actual Results	Revenue and Spending variances		Flexible Budget	Planning Budget	Activity Variances
Cars Washed	8500			8500	8400
Revenue ( 6.8*q)	59,220	1,420	F	57800	57120	680	F
Expenses:
Cleaning Supplies ( + 0.5q)	4700	450	U	4250	4200	50	U
Electricity ( 1100 + 0.06q)	1574	36	F	1610	1604	6	U
Maintenance ( + 0.1q)	1080	230	U	850	840	10	U
Wages and salaries ( 5000 + 0.3q)	7880	330	U	7550	7520	30	U
Depreciation ( 8200 + 0q)	8200	0	None	8200	8200	0	None
Rent ( 1900 + 0q)	2100	200	U	1900	1900	0	None
Administrative Expenses ( 1600 + 0.1q)	1584	866	F	2450	2440	10	U
Total expense	27118	308	U	26810	26704	106	U
Net operating income	32,102	1,112	F	30990	30416	574	F

Hope This Helped ! Let Me Know In Case of Any Queries.