Question

Exercise 9-14 Prepare a Flexible Budget Performance Report [LO9-4]

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				$	0.40
Electricity	$	1,400		$	0.10
Maintenance				$	0.20
Wages and salaries	$	4,200		$	0.30
Depreciation	$	8,300
Rent	$	1,900
Administrative expenses	$	1,500		$	0.03

For example, electricity costs are $1,400 per month plus $0.10 per car washed. The company expects to wash 8,300 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		8,400
Revenue	$	53,560
Expenses:
Cleaning supplies		3,820
Electricity		2,200
Maintenance		1,900
Wages and salaries		7,050
Depreciation		8,300
Rent		2,100
Administrative expenses		1,649
Total expense		27,019
Net operating income	$	26,541

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity 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.)

Exercise 9-14 Prepare a Flexible Budget Performance Report [LO9-4]

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				$	0.40
Electricity	$	1,400		$	0.10
Maintenance				$	0.20
Wages and salaries	$	4,200		$	0.30
Depreciation	$	8,300
Rent	$	1,900
Administrative expenses	$	1,500		$	0.03

For example, electricity costs are $1,400 per month plus $0.10 per car washed. The company expects to wash 8,300 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		8,400
Revenue	$	53,560
Expenses:
Cleaning supplies		3,820
Electricity		2,200
Maintenance		1,900
Wages and salaries		7,050
Depreciation		8,300
Rent		2,100
Administrative expenses		1,649
Total expense		27,019
Net operating income	$	26,541

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity 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	8400			8400			8300
Revenue	53560	1480	F	52080	620	F	51460
Expenses:
Cleaning supplies	3820	460	U	3360	40	U	3320
Electricity	2200	40	F	2240	10	U	2230
Maintenance	1900	220	U	1680	20	U	1660
Wages and salaries	7050	330	U	6720	30	U	6690
Depreciation	8300	0	None	8300	0	None	8300
Rent	2100	200	U	1900	0	None	1900
Administrative expenses	1649	103	F	1752	3	U	1749
Total expenses	27019	1067	U	25952	103	U	25849
Net operating income	26541	413	F	26128	517	F	25611