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				$	0.50
Electricity	$	1,300		$	0.10
Maintenance				$	0.15
Wages and salaries	$	4,300		$	0.40
Depreciation	$	8,500
Rent	$	2,000
Administrative expenses	$	1,400		$	0.05

For example, electricity costs are $1,300 per month plus $0.10 per car washed. The company expects to wash 8,100 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		8,200
Revenue	$	50,700
Expenses:
Cleaning supplies		4,550
Electricity		2,080
Maintenance		1,455
Wages and salaries		7,900
Depreciation		8,500
Rent		2,200
Administrative expenses		1,705
Total expense		28,390
Net operating income	$	22,310

NEED TO FILL IN:

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.)

Revenue and Spending Variances Activity Variances

Revenue

Expenses:Cleaning supplies

Electricity

Maintenance

Wages and salaries

Depreciation

Rent

Administrative expenses

Total expense

Net operating income

Answer 1

	Actual	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Cars washed	8200			8200			8100
Revenue	50700	1500	F	49200	600	F	48600
Expenses:
Cleaning supplies	4550	450	U	4100	50	U	4050
Electricity	2080	40	F	2120	10	U	2110
Maintenance	1455	225	U	1230	15	U	1215
Wages and salaries	7900	320	U	7580	40	U	7540
Depreciation	8500	0	None	8500	0	None	8500
Rent	2200	200	U	2000	0	None	2000
Administrative expenses	1705	105	F	1810	5	U	1805
Total expenses	28390	1050	U	27340	120	U	27220
Net operating income	22310	450	F	21860	480	F	21380