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 $ 0.50 Electricity $ 1,400 $ 0.08 Maintenance $ 0.25 Wages and salaries $ 4,400 $ 0.30 Depreciation $ 8,100 Rent $ 2,000 Administrative expenses $ 1,500 $ 0.03 For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.70 per car washed.

Required: Prepare the company’s planning budget for August.

Answer 1

Ans.	LAVAGE RAPID
	Planning Budget
	For the Month of August
	Cars	8,300
	Revenue	$55,610
	Expenses:
	Cleaning supplies	$4,150
	Electricity	$2,064
	Maintenance	$2,075
	Wages and salaries	$6,890
	Depreciation	$8,100
	Rent	$2,000
	Administrative expenses	$1,749
	Total expenses	$27,028
	Net operating income	$28,582
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain constant.
	*Calculation of Flexible Budget:
		Planning Budget
	Cars	8,300
	Revenue	$6.70 * 8,300
	Expenses:
	Cleaning supplies	$0.50 * 8,300
	Electricity	$1,400 + ($0.08 * 8,300)
	Maintenance	$0.25 * 8,300
	Wages and salaries	$4,400 + ($0.30 * 8,300)
	Depreciation	$8,100
	Rent	$2,000
	Administrative expenses	$1,500 + ($0.03 * 8,300)