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/month	cost per car washed
cleaning supplies		$0.60
electricity	$1300	$0.10
maintence		$0.15
wages/salaries	$4500	$0.30
depreciation	$8200
rent	$1800
Admin. expenses	$1600	$0.03

For example, electricity costs are $1,300 per month plus $0.10 per car washed. The company expects to wash 8,200 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 8,300

Revenue $ 57,860
Expenses:
Cleaning supplies 5,420
Electricity 2,090
Maintenance 1,470
Wages and salaries 7,320
Depreciation 8,200
Rent 2,000
Administrative expenses 1,746
Total expense 28,246
Net operating income $ 29,614

Required:

Calculate the company's 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.)

2. 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/month	cost per car washed
cleaning supplies		$0.70
electricity	$1100	$0.08
maintence		$0.25
wages/salaries	$4800	$0.30
depreciation	$8300
rent	$2000
Admin. expenses	$1400	$0.04

For example, electricity costs are $1,100 per month plus $0.08 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.40 per car washed.

The actual operating results for August appear below.

Lavage Rapide

Income Statement

For the Month Ended August 31

Actual cars washed 8,100

Revenue $53,300

Expenses:

Cleaning supplies 6,100

Electricity 1,710

Maintenance 2,240

Wages and salaries 7,560

Depreciation 8,300

Rent 2,200

Administrative expenses 1,620

Total expense 29,730

Net operating income $23,570

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 1:

Lavage Rapide
Revenue and sepnding variances
For the month ended August 31
Particulars	Actual results	Revenue and spending variances		Flexible Budget
Car Washed	8300			8300
Revenue	$57,860.00	$1,420.00	F	$56,440.00
Expenses:
Cleaning Supplies	$5,420.00	$440.00	U	$4,980.00
Electricity	$2,090.00	$40.00	F	$2,130.00
Maintenance	$1,470.00	$225.00	U	$1,245.00
Wages and Salaries	$7,320.00	$330.00	U	$6,990.00
Depreciation	$8,200.00	$0.00	None	$8,200.00
Rent	$2,000.00	$200.00	U	$1,800.00
Administrative expenses	$1,746.00	$103.00	F	$1,849.00
Total Expenses	$28,246.00	$1,052.00	U	$27,194.00
Net Operating Income	$29,614.00	$368.00	F	$29,246.00

Solution 2:

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	8100			8100			8000
Revenue	$53,300.00	$1,460.00	F	$51,840.00	$640.00	F	$51,200.00
Expenses:
Cleaning Supplies	$6,100.00	$430.00	U	$5,670.00	$70.00	U	$5,600.00
Electricity	$1,710.00	$38.00	F	$1,748.00	$8.00	U	$1,740.00
Maintenance	$2,240.00	$215.00	U	$2,025.00	$25.00	U	$2,000.00
Wages and Salaries	$7,560.00	$330.00	U	$7,230.00	$30.00	U	$7,200.00
Depreciation	$8,300.00	$0.00	None	$8,300.00	$0.00	None	$8,300.00
Rent	$2,200.00	$200.00	U	$2,000.00	$0.00	None	$2,000.00
Administrative expenses	$1,620.00	$104.00	F	$1,724.00	$4.00	U	$1,720.00
Total Expenses	$29,730.00	$1,033.00	U	$28,697.00	$137.00	U	$28,560.00
Net Operating Income	$23,570.00	$427.00	F	$23,143.00	$503.00	F	$22,640.00