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		$	0.06
Maintenance				$	0.25
Wages and salaries	$	4,800		$	0.20
Depreciation	$	8,100
Rent	$	1,900
Administrative expenses	$	1,700		$	0.03

For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.10 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	$	52,120
Expenses:
Cleaning supplies		4,600
Electricity		1,762
Maintenance		2,290
Wages and salaries		6,800
Depreciation		8,100
Rent		2,100
Administrative expenses		1,846
Total expense		27,498
Net operating income	$	24,622

Required:

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

	Lavage Rapide Flexible Budget Performance Report For the Month Ended August 31 Actual Results Flexible Budget Planning Budget Cars washed 8,300 Revenue $52,120 Expenses: Cleaning supplies 4,600 Electricity 1,762 Maintenance 2,290 Wages and salaries 6,800 Depreciation 8,100 Rent 2,100 Administrative expenses 1,846 Total expense 27,498 Net operating income $24,622

Answer 1

Lavage Rapide
Flexible Budget Performance Report
For the month ended August 31
	Actual Results	Revenue and Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Expected No. of car wash	8300			8300			8200
Revenue	52120	1,490	F	50630	610	F	50020
Expenses:
Cleaning Supplies	4600	450	U	4150	50	U	4100
Electricity	1762	36	F	1798	6	U	1792
Maintenance	2290	215	U	2075	25	U	2050
Wages and Salary	6800	340	U	6460	20	U	6440
Depreciation	8100	-	None	8100	-	None	8100
Rent	2100	200	U	1900	-	None	1900
Administrative Expense	1846	103	F	1949	3	U	1946
Total Expense	27498	1,066	U	26432	104	U	26328
Net Operating Income	24622	424	F	24198	506	F	23692