Question

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash 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 $ 0.20 Wages and salaries $ 4,900 $ 0.20 Depreciation $ 8,100 Rent $ 1,900 Administrative expenses $ 1,800 $ 0.04

For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expects to wash 8,400 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 8,500 Revenue $ 54,180 Expenses: Cleaning supplies 5,540 Electricity 2,026 Maintenance 1,920 Wages and salaries 6,940 Depreciation 8,100 Rent 2,100 Administrative expenses 2,036 Total expense 28,662 Net operating income $ 25,518 Required: Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending 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

	Actual	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Cars washed	8500			8500			8400
Revenue	54180	1480	F	52700	620	F	52080
Expenses:
Cleaning supplies	5540	440	U	5100	60	U	5040
Electricity	2026	39	F	2065	9	U	2056
Maintenance	1920	220	U	1700	20	U	1680
Wages and salaries	6940	340	U	6600	20	U	6580
Depreciation	8100	0	None	8100	0	None	8100
Rent	2100	200	U	1900	0	None	1900
Administrative expenses	2036	104	F	2140	4	U	2136
Total expenses	28662	1057	U	27605	113	U	27492
Net operating income	25518	423	F	25095	507	F	24588