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 $ 1,400 $ 0.07 Maintenance $ 0.30 Wages and salaries $ 4,800 $ 0.40 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,500 $ 0.03 For example, electricity costs are $1,400 per month plus $0.07 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.30 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 $ 52,500 Expenses: Cleaning supplies 6,100 Electricity 1,930 Maintenance 2,640 Wages and salaries 8,360 Depreciation 8,300 Rent 2,200 Administrative expenses 1,640 Total expense 31,170 Net operating income $ 21,330 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

LAVAGE RAPIDE
FLEXIBLE BUDGET PERFORMANCE REPORT - AUGUST
	Actual Results	Revenue and spending variances		Flexible budget	Activity Variances		Planing budget
								Cars Cleaned	8100			8100			8000
								Revenue	52500	1470	F	51030	630	F	50400
Expenses:
Cleaning Supplies	6100	430	U	5670	70	U	5600
Electricity	1930	37	F	1967	7	U	1960
Maintenance	2640	210	U	2430	30	U	2400
Salaries and wages	8360	320	U	8040	40	U	8000
Depreciation	8300	0		8300	0	U	8300
Rent	2200	200	u	2000	0		2000
Administrative exp.	1640	103	F	1743	3	U	1740
Total Expenses	31170	1020	U	30150	150	U	30000
Net Operating Income	21330	450		20880	480	F	20400
FLEXIBLE BUDGET
Cars Cleaned	8100
	Variable			Fixed	Total
	Per unit	Total
Revenue	6.30	51030			51030
Expenses:
Cleaning Supplies	0.70	5670			5670
Electricity	0.07	567		1400	1967
Maintenance	0.30	2430		0	2430
Salaries and wages	0.40	3240		4800	8040
Depreciation				8300	8300
Rent				2000	2000
Administrative exp.	0.03	243		1500	1743
Total Expenses					30150
PLANNING BUDGET
Cars Cleaned	8000
	Variable			Fixed	Total
	Per unit	Total
Revenue	6.30	50400			50400
Costs:
Cleaning Supplies	0.70	5600			5600
Electricity	0.07	560		1400	1960
Maintenance	0.30	2400		0	2400
Salaries and wages	0.40	3200		4800	8000
Depreciation				8300	8300
Rent				2000	2000
Administrative exp.	0.03	240		1500	1740
Total Expenses					30000