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				$	0.80
Electricity	$	1,200		$	0.06
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.30
Depreciation	$	8,300
Rent	$	2,000
Administrative expenses	$	1,600		$	0.04

  

For example, electricity costs are $1,200 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.00 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	$	52,500
Expenses:
Cleaning supplies		7,220
Electricity		1,674
Maintenance		1,500
Wages and salaries		7,580
Depreciation		8,300
Rent		2,200
Administrative expenses		1,836
Total expense		30,310
Net operating income	$	22,190

  

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

Lavage Rapide Flexible Budget Performance Report For the Month Ended August
	Actual Results	Flexible Budget	Revenue and Spending Variances
Cars washed	8500	8500
Revenue ($6.00)	52500	51000	1500	F
Expenses:
Cleaning supplies 0.8	7220	6800	420	U
Electricity (1200+0.06)	1674	1710	36	F
Maintenance (0.15	1500	1275	225	U
Wages and salaries (4700+0.3)	7580	7250	330	U
Depreciation	8300	8300	0
Rent	2200	2000	200	U
Administrative expenses (1600+0.04)	1836	1940	104	F
Total expense	30310	29275	1035	U
Net operating income	22190	21725	465	F