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				$	0.60
Electricity	$	1,100		$	0.09
Maintenance				$	0.30
Wages and salaries	$	4,700		$	0.20
Depreciation	$	8,200
Rent	$	2,000
Administrative expenses	$	1,700		$	0.04

For example, electricity costs are $1,100 per month plus $0.09 per car washed. The company actually washed 8,500 cars in August and collected an average of $6.20 per car washed.

Required:

Prepare the company’s flexible budget for August.

Answer 1

Lavage Rapide

Flexible Budget

For the Month Ended August 31

Revenue	$52,700 (8,500*$6.2)
Expenses :
Cleaning supplies	$5,100 (8,500*$0.6)
Electricity	$1,865 [1,100+(8,500*$0.09)]
Maintenance	$2,550 (8,500*$0.3)
Wages and salaries	$6,400 [$4,700+(8,500*$0.2)]
Depreciation	$8,200
Rent	$2,000
Administrative expenses	$2,040 [$1,700+(8,500*$0.04)]
Total expense	$28,155
Net operating income	$24,545