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				$	0.80
Electricity	$	1,200		$	0.15
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.30
Depreciation	$	6,000
Rent	$	8,000
Administrative expenses	$	4,000		$	0.10

For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company actually washed 8,800 cars in August and collected an average of $4.90 per car washed.

Required:

Prepare the company’s flexible budget for August.

Answer 1

Solution :

Lavage Rapide
Flexible Budget
For the month ended August 31
Particulars	Amount
Revenue (8800 * $4.90)	$43,120.00
Expenses:
Cleaning supplies (8800*$0.8)	$7,040.00
Electricity ($1,200 + 8800*$0.15)	$2,520.00
Maintenance (8800*$0.20)	$1,760.00
Wages and Salaries ($5,000 + 8800*$0.30)	$7,640.00
Depreciation	$6,000.00
Rent	$8,000.00
Administrative Expenses ($4,000 + 8800*$0.10)	$4,880.00
Total expenses	$37,840.00
Net Operating income	$5,280.00