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				$	0.60
Electricity	$	1,100		$	0.06
Maintenance				$	0.30
Wages and salaries	$	4,300		$	0.30
Depreciation	$	8,200
Rent	$	1,800
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 8,500 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		8,600
Revenue	$	60,750
Expenses:
Cleaning supplies		5,600
Electricity		1,580
Maintenance		2,790
Wages and salaries		7,210
Depreciation		8,200
Rent		2,000
Administrative expenses		1,585
Total expense		28,965
Net operating income	$	31,785

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	8600			8600			8500
Revenue	$60,750.00	$1,410.00	F	$59,340.00	$690.00	F	$58,650.00
Expenses:
Cleaning Supplies	$5,600.00	$440.00	U	$5,160.00	$60.00	U	$5,100.00
Electricity	$1,580.00	$36.00	F	$1,616.00	$6.00	U	$1,610.00
Maintenance	$2,790.00	$210.00	U	$2,580.00	$30.00	U	$2,550.00
Wages and Salaries	$7,210.00	$330.00	U	$6,880.00	$30.00	U	$6,850.00
Depreciation	$8,200.00	$0.00	None	$8,200.00	$0.00	None	$8,200.00
Rent	$2,000.00	$200.00	U	$1,800.00	$0.00	None	$1,800.00
Administrative expenses	$1,585.00	$101.00	F	$1,686.00	$1.00	U	$1,685.00
Total Expenses	$28,965.00	$1,043.00	U	$27,922.00	$127.00	U	$27,795.00
Net Operating Income	$31,785.00	$367.00	F	$31,418.00	$563.00	F	$30,855.00