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				$	0.70
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.)

Answer 1

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 Next > < Previous Related Solutions 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 $ 1,500 $ 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. 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