Question

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash 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	$	1,000		$	0.08
Maintenance				$	0.30
Wages and salaries	$	4,100		$	0.40
Depreciation	$	8,200
Rent	$	2,100
Administrative expenses	$	1,600		$	0.02

For example, electricity costs are $1,000 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.20 per car washed.

  

The actual operating results for August appear below.

  

Lavage Rapide Income Statement For the Month Ended August 31
Actual cars washed		8,500
Revenue	$	54,180
Expenses:
Cleaning supplies		6,380
Electricity		1,642
Maintenance		2,760
Wages and salaries		7,820
Depreciation		8,200
Rent		2,300
Administrative expenses		1,668
Total expense		30,770
Net operating income	$	23,410

Required:

Complete the flexible budget performance report that shows the company’s activity variances and 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.)

Answer 1

Answer-

LAVAGE RAPIDE
FLEXIBLE BUDGET PERFORMANCE REPORT
FOR THE MONTH ENDED AUGUST 31
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	1480	Favorable	620	Favorable
Less:-Expenses
Cleaning expenses	-430	Unfavorable	-70	Unfavorable
Electricity	38	Favorable	-8	Unfavorable
Maintenance	-210	Unfavorable	-30	Unfavorable
Wages & salaries	-320	Unfavorable	-40	Unfavorable
Depreciation	0	None	0	None
Rent	-200	Unfavorable	0	None
Administrative expenses	102	Favorable	-2	Unfavorable
Total Expenses	-1020	Unfavorable	-150	Unfavorable
Income from opreations	460	Favorable	470	Favorable

Explanation-

Lavage Rapide
Revenue & Spending Variances
For the month ended August 31
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	8500 car washed*$6.20 per car washed	52700	54180	1480	Favorable
Less:-Expenses
Cleaning expenses	8500 car washed*$0.70 per car washed	5950	6380	-430	Unfavorable
Electricity	(8500 car washed*$0.08 per car washed)+$1000	1680	1642	38	Favorable
Maintenance	8500 car washed*$0.30 per car washed	2550	2760	-210	Unfavorable
Wages & salaries	(8500 car washed*$0.40 per car washed)+$4100	7500	7820	-320	Unfavorable
Depreciation		8200	8200	0	None
Rent		2100	2300	-200	Unfavorable
Administrative expenses	(8500 car washed*$0.02 per car washed)+$1600	1770	1668	102	Favorable
Total expenses		29750	30770	-1020	Unfavorable
Income from operations		22950	23410	460	Favorable
Lavage Rapide
Activity Variance
For the month ended August 31
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	8400 car washed*$6.20 per car washed= $52080	52700	620	Favorable
Less:-Expenses
Cleaning expenses	8400 car washed*$0.70 per car washed= $5880	5950	-70	Unfavorable
Electricity	(8400 car washed*$0.08 per car washed)+$1000= $1672	1680	-8	Unfavorable
Maintenance	8400 car washed*$0.30 per car washed= $2520	2550	-30	Unfavorable
Wages & salaries	(8400 car washed*$0.40 per car washed)+$4100= $7460	7500	-40	Unfavorable
Depreciation	$8200	8200	0	None
Rent	$2100	2100	0	None
Administrative expenses	(8400 car washed*$0.02 per car washed)+$1600= $1768	1770	-2	Unfavorable
Total Expenses	29600	29750	-150	Unfavorable
Income from opreations	22480	22950	470	Favorable