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		$	0.10
Maintenance				$	0.20
Wages and salaries	$	4,300		$	0.40
Depreciation	$	8,000
Rent	$	2,200
Administrative expenses	$	1,800		$	0.02

For example, electricity costs are $1,400 per month plus $0.10 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.60 per car washed.

Required:

Prepare the company’s planning budget for August.

	Lavage Rapide Planning 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

The correct answer is :

Lavage Rapide
Planning Budget
For the Month Ended August 31
Revenue	56,100
Expenses:
Cleaning supplies	5,950
Electricity	2,250
Maintenance	1,700
Wages and salaries	7,700
Depreciation	8,000
Rent	2,200
Administrative expenses	1,970
Total expense	29,770
Net operating income	26,330

Note :

	Fixed Cost per Month		Cost per		Cars Expected to beWashed	Variable Cost  Car washed * Cost Per Car washed)	Total ( Fixed + Variable)
			Car Washed
Cleaning supplies			$	0.70	8,500.00	5,950.00	5,950.00
Electricity	$	1,400.00	$	0.10	8,500.00	850.00	2,250.00
Maintenance			$	0.20	8,500.00	1,700.00	1,700.00
Wages and salaries	$	4,300.00	$	0.40	8,500.00	3,400.00	7,700.00
Depreciation	$	8,000.00			-	-	8,000.00
Rent	$	2,200.00			-	-	2,200.00
Administrative expenses	$	1,800.00	$	0.02	8,500.00	170.00	1,970.00
							29,770.00