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 $ 0.40 Electricity $ 1,400 $ 0.09 Maintenance $ 0.30 Wages and salaries $ 4,500 $ 0.20 Depreciation $ 8,200 Rent $ 2,000 Administrative expenses $ 1,400 $ 0.04

For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.70 per car washed.

The actual operating results for August are as follows:

Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,300 Revenue $ 57,040 Expenses: Cleaning supplies 3,780 Electricity 2,108 Maintenance 2,700 Wages and salaries 6,500 Depreciation 8,200 Rent 2,200 Administrative expenses 1,628 Total expense 27,116 Net operating income $ 29,924

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

		Flexible budget variance
		Actual	Revenue and spending		Flexible	Activity variance		planned
		Result	variance		budget			budget
Cars washed		8,300			8,300			8,200
Revenue		57,040	1,430	F	55610	670	F	54940
Expenses
Cleaning supplies		3,780	460	U	3320	40	U	3280
Electricity		2,108	39	F	2147	9	U	2138
Maintenance		2,700	210	U	2490	30	U	2460
Wages and salaries		6,500	340	U	6160	20	U	6140
Depreciation		8,200	0	N	8,200	0	N	8,200
Rent		2,200	200	N	2,000	0	N	2,000
Administrative expenses		1,628	104	F	1,732	4	N	1,728
total expense		27,116	1,067	U	26,049	103	U	25,946
net operating income		29,924	363	F	29,561	567	F	28,994