Question
In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...
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 | $ | 0.70 | |||
| Electricity | $ | 1,200 | $ | 0.09 | |
| Maintenance | $ | 0.10 | |||
| Wages and salaries | $ | 4,200 | $ | 0.30 | |
| Depreciation | $ | 8,500 | |||
| Rent | $ | 2,100 | |||
| Administrative expenses | $ | 1,700 | $ | 0.02 | |
For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company actually washed 8,400 cars in August and collected an average of $6.40 per car washed.
Required:
Prepare the company’s flexible budget for August.
Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:
| Vulcan Flyovers | ||||||
| Operating Data | ||||||
| For the Month Ended July 31 | ||||||
| Actual Results |
Flexible Budget |
Planning Budget |
||||
| Flights (q) | 61 | 61 | 59 | |||
| Revenue ($350.00q) | $ | 16,500 | $ | 21,350 | $ | 20,650 |
| Expenses: | ||||||
| Wages and salaries ($3,600 + $88.00q) | 8,932 | 8,968 | 8,792 | |||
| Fuel ($33.00q) | 2,177 | 2,013 | 1,947 | |||
| Airport fees ($870 + $32.00q) | 2,682 | 2,822 | 2,758 | |||
| Aircraft depreciation ($9.00q) | 549 | 549 | 531 | |||
| Office expenses ($230 + $1.00q) | 459 | 291 | 289 | |||
| Total expense | 14,799 | 14,643 | 14,317 | |||
| Net operating income | $ | 1,701 | $ | 6,707 | $ | 6,333 |
The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.
Required:
1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (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.)
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:
| Fixed Cost per Month | Cost per Course | Cost per Student |
|||||
| Instructor wages | $ | 2,970 | |||||
| Classroom supplies | $ | 290 | |||||
| Utilities | $ | 1,250 | $ | 70 | |||
| Campus rent | $ | 4,900 | |||||
| Insurance | $ | 2,200 | |||||
| Administrative expenses | $ | 3,900 | $ | 45 | $ | 6 | |
For example, administrative expenses should be $3,900 per month plus $45 per course plus $6 per student. The company’s sales should average $880 per student.
The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:
| Actual | ||
| Revenue | $ | 51,660 |
| Instructor wages | $ | 11,160 |
| Classroom supplies | $ | 17,830 |
| Utilities | $ | 1,940 |
| Campus rent | $ | 4,900 |
| Insurance | $ | 2,340 |
| Administrative expenses | $ | 3,878 |
Required:
Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (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.)
Solutions
Expert Solution
| Ans. 1 | *Flexible budget is prepared on the basis of actual units. | ||||||||
| *Fixed expenses are always remain same. | |||||||||
| LAVAGE RAPIDE | |||||||||
| Flexible Budget | |||||||||
| For the Month Ended August 31 | |||||||||
| Cars | 8,300 | ||||||||
| Calculations | |||||||||
| Revenue | $6.40 * 8,400 | $53,760 | |||||||
| Expenses: | |||||||||
| Cleaning supplies | $0.70 * 8,400 | $5,880 | |||||||
| Electricity | $1,200 + ($0.09 * 8,400) | $1,956 | |||||||
| Maintenance | $0.10 * 8,400 | $840 | |||||||
| Wages and salaries | $4,200 + ($0.30 * 8,400) | $6,720 | |||||||
| Depreciation | $8,500 | $8,500 | |||||||
| Rent | $2,100 | $2,100 | |||||||
| Administrative expenses | $1,700 + ($0.02 * 8,400) | $1,868 | |||||||
| Total expenses | $27,864 | ||||||||
| Net operating income | $25,896 | ||||||||
| Ans. 2 | VULCAN FLYOVERS | ||||||||
| Flexible Budget Performance Report | |||||||||
| For the Month Ended JULY 31 | |||||||||
| Actual Results | Spending variance | Flexible Budget | Activity variance | Planning Budget | |||||
| Flights | 61 | 61 | 59 | ||||||
| Revenue | $16,500 | $4,850 | U | $21,350 | $700 | F | $20,650 | ||
| Expenses: | |||||||||
| Wages and salaries | $8,932 | $36 | F | $8,968 | $176 | U | $8,792 | ||
| Fuel | $2,177 | $164 | U | $2,013 | $66 | U | $1,947 | ||
| Airport fees | $2,682 | $140 | F | $2,822 | $64 | U | $2,758 | ||
| Aircraft depreciation | $549 | $0 | none | $549 | $18 | U | $531 | ||
| Office expenses | $459 | $168 | U | $291 | $2 | U | $289 | ||
| Total expenses | $14,799 | $156 | U | $14,643 | $326 | U | $14,317 | ||
| Net operating income | $1,701 | $5,006 | U | $6,707 | $374 | F | $6,333 | ||
| *Flexible budget is prepared on the basis of actual units. | |||||||||
| *Fixed costs remain constant on each level of sales. | |||||||||
| Revenue & Spending variance = Actual results - Flexible budget | |||||||||
| Activity variance = Flexible budget - Planning budget |
 ekkarill92 answered 2 years agoRelated SolutionsLavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...Lavage Rapide is a Canadian company that owns and operates a
large automatic car wash facility near Montreal. The following
table provides estimates concerning the company’s costs:
Fixed Cost
per Month
Cost per
Car Washed
Cleaning supplies
$
0.70
Electricity
$
1,400
$
0.08
Maintenance
$
0.10
Wages and salaries
$
4,100
$
0.40
Depreciation
$
8,300
Rent
$
2,200
Administrative expenses
$
1,700
$
0.05
For example, electricity costs should be $1,400 per month plus
$0.08 per car washed....
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
0.70
Electricity
$
1,200
$
0.09
Maintenance
$
0.20
Wages and salaries
$
4,500
$
0.20
Depreciation
$
8,000
Rent
$
2,200
Administrative expenses
$
1,600
$
0.01
For example, electricity costs are $1,200 per month plus $0.09
per car washed. The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
1,500
$
0.07
Maintenance
$
0.20
Wages and salaries
$
4,400
$
0.20
Depreciation
$
8,300
Rent
$
2,100
Administrative expenses
$
1,300
$
0.05
For example, electricity costs are $1,500 per month plus $0.07
per car washed. The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
1,400
$
0.08
Maintenance
$
0.15
Wages and salaries
$
4,500
$
0.30
Depreciation
$
8,400
Rent
$
1,800
Administrative expenses
$
1,700
$
0.01
For example, electricity costs are $1,400 per month plus $0.08
per car washed. The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
1,300
$
0.09
Maintenance
$
0.30
Wages and salaries
$
4,500
$
0.30
Depreciation
$
8,400
Rent
$
2,000
Administrative expenses
$
1,300
$
0.02
For example, electricity costs are $1,300 per month plus $0.09
per car washed. The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
0.80
Electricity
$
1,200
$
0.15
Maintenance
$
0.20
Wages and salaries
$
5,000
$
0.30
Depreciation
$
6,000
Rent
$
8,000
Administrative expenses
$
4,000
$
0.10
For example, electricity costs are $1,200 per month plus $0.15
per car washed. The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
1,300
$
0.10
Maintenance
$
0.25
Wages and
salaries
$
5,000
$
0.40
Depreciation
$
8,200
Rent
$
1,900
Administrative
expenses
$
1,600
$
0.03
For example,
electricity costs are $1,300 per month plus $0.10 per car washed.
The...
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...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
$
0.05
Maintenance
$
0.15
Wages and salaries
$
4,700
$
0.20
Depreciation
$
8,300
Rent
$
2,000
Administrative expenses
$
1,500
$
0.03
For example, electricity costs are $1,100 per month plus $0.05
per car washed. The...
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