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	$	1,300		$	0.06
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.30
Depreciation	$	8,200
Rent	$	1,900
Administrative expenses	$	1,600		$	0.02

For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,300 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		8,400
Revenue	$	53,560
Expenses:
Cleaning supplies		6,310
Electricity		1,768
Maintenance		1,485
Wages and salaries		7,550
Depreciation		8,200
Rent		2,100
Administrative expenses		1,666
Total expense		29,079
Net operating income	$	24,481

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.)

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	$	1,300		$	0.06
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.30
Depreciation	$	8,200
Rent	$	1,900
Administrative expenses	$	1,600		$	0.02

For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,300 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		8,400
Revenue	$	53,560
Expenses:
Cleaning supplies		6,310
Electricity		1,768
Maintenance		1,485
Wages and salaries		7,550
Depreciation		8,200
Rent		2,100
Administrative expenses		1,666
Total expense		29,079
Net operating income	$	24,481

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.)

Lavage rapide

Flexibgle Budget Performance Report

For the the Month Ended August 31

	actual results	revenue and speanding variances		flexible budget	activity variance		planning budget
cars washed	8,400
revenue	53560		F
expenses
cleaning supplies	6310		u
electricty	1768		f
maintenance	1485		u
wages and salaries	7550
depreciation	8200
rent	2100
adminsitrative expenses	1666
total expense	29079
net operating income	24481

Answer 1

Lavage Rapide
Flexible Budget Performance Report
For the month ended August 31
	Actual Results	Revenue and Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Expected No. of car wash	8,400			8,400			8,200
Revenue	53,560	1,480	F	52,080	1,240	F	50,840
Expenses:
Cleaning Supplies	6,310	430	U	5,880	140	U	5,740
Electricity	1,768	36	F	1,804	12	U	1,792
Maintenance	1,485	225	U	1,260	30	U	1,230
Wages and Salary	7,550	330	U	7,220	60	U	7,160
Depreciation	8,200	-	None	8,200	-	None	8,200
Rent	2,100	200	U	1,900	-	None	1,900
Administrative Expense	1,666	102	F	1,768	4	U	1,764
Total Expense	29,079	1,047	U	28,032	246	U	27,786
Net Operating Income	24,481	433	F	24,048	994	F	23,054