Question

Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the company’s costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.90
Electricity	$	2,000			0.30
Maintenance					0.50
Wages and salaries		5,300			0.60
Depreciation		8,900
Rent		2,700
Administrative expenses		2,400			0.04

The company expects to charge customers an average of $8.00 per car washed.

Required:
Prepare a flexible budget for October assuming either 7,500 or 8,500 cars are washed.

Answer 1

Auto Lavage
	Calculation ( 7500 cars )	Flexible budget ( 7500 cars )	Calculation ( 8500 cars )	Flexible budget ( 8500 cars )
Revenue	7500 * 8	60,000	8500 * 8	68,000
Expenses :-
Cleaning supplies	7500 * 0.9	6,750	8500 * 0.9	7,650
Electricity	2000 + 7500 * 0.3	4250	2000 + 8500 * 0.3	4550
Maintenance	7500 * 0.5	3750	8500 * 0.5	4250
Wages and salaries	5300 + 7500* 0.60	9800	5300 + 8500* 0.60	10400
Depreciation		8900		8900
Rent		2700		2700
Administrative Exp.	2400 + 7500 * 0.04	2700	2400 + 8500 * 0.04	2740
Total expense		38,850		41,190
Net operating Income		21,150		26,810