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	$	4,100		$	0.30
Depreciation	$	8,200
Rent	$	2,000
Administrative expenses	$	1,500		$	0.05

For example, electricity costs are $1,400 per month plus $0.07 per car washed. The company actually washed 8,300 cars in August and collected an average of $6.70 per car washed.

Required:

Prepare the company’s flexible budget for August.

	Lavage Rapide Flexible Budget For the Month Ended August 31 Revenue Expenses: Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses Total expense Net operating income

Answer 1

Lavage Rapide
Flexible Budget
For the Month Ended August 31
Revenue	55,610
Expenses:
Cleaning supplies	5,810
Electricity	1,981
Maintenance	2,490
Wages and salaries	6,590
Depreciation	8,200
Rent	2,000
Administrative expenses	1,915
Total expense	28,986
Net operating income	26,624

Notes:

1. Revenue = 8,300 * $ 6.70

2. Expenses :

	Fixed Cost per Month		Cost per		Cars Washed	Variable Cost  Car washed * Cost Per Car washed)	Total ( Fixed + Variable)
			Car Washed
Cleaning supplies			$	0.70	8,300.00	5,810.00	5,810.00
Electricity	$	1,400.00	$	0.07	8,300.00	581.00	1,981.00
Maintenance			$	0.30	8,300.00	2,490.00	2,490.00
Wages and salaries	$	4,100.00	$	0.30	8,300.00	2,490.00	6,590.00
Depreciation	$	8,200.00			-	-	8,200.00
Rent	$	2,000.00			-	-	2,000.00
Administrative expenses	$	1,500.00	$	0.05	8,300.00	415.00	1,915.00
							28,986.00