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				$	0.60
Electricity	$	1,300		$	0.09
Maintenance				$	0.30
Wages and salaries	$	4,500		$	0.30
Depreciation	$	8,400
Rent	$	2,000
Administrative expenses	$	1,300		$	0.02

For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expects to wash 8,100 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		8,200
Revenue	$	52,320
Expenses:
Cleaning supplies		5,360
Electricity		1,999
Maintenance		2,670
Wages and salaries		7,290
Depreciation		8,400
Rent		2,200
Administrative expenses		1,362
Total expense		29,281
Net operating income	$	23,039

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