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				$	0.70
Electricity	$	1,000		$	0.05
Maintenance				$	0.15
Wages and salaries	$	4,300		$	0.20
Depreciation	$	8,100
Rent	$	2,100
Administrative expenses	$	1,600		$	0.02

For example, electricity costs are $1,000 per month plus $0.05 per car washed. The company actually washed 8,200 cars in August and collected an average of $6.70 per car washed.

Required:

Prepare the company’s flexible budget for August.

Answer 1

Answer

• Flexible Budget

	Flexible Budget
Cars washed	8,200
Revenues	$             54,940.00
Expenses:
Cleaning Supplies	$               5,740.00
Electricity	$               1,410.00
Maintenance	$               1,230.00
Wages & Salaries	$               5,940.00
Depreciation	$               8,100.00
Rent	$               2,100.00
Administrative expense	$               1,764.00
Total Expenses	$             26,284.00
Net Operating Income	$             28,656.00

• Workings

		WORKING COLUMNS					Flexible Budget
Cars washed							8,200
Revenues				$      6.70			$             54,940.00
Expenses:
Cleaning Supplies	(	$                      -	)	$      0.70	x 8200		$               5,740.00
Electricity	(	$         1,000.00	)	$      0.05	x 8200	)	$               1,410.00
Maintenance	(	$                      -	+	$      0.15	x 8200	)	$               1,230.00
Wages & Salaries	(	$         4,300.00	+	$      0.20	x 8200	)	$               5,940.00
Depreciation	(	$         8,100.00	+	$           -	x 8200		$               8,100.00
Rent	(	$         2,100.00	)	$           -	x 8200		$               2,100.00
Administrative expense	(	$         1,600.00	+	$      0.02	x 8200	)	$               1,764.00
Total Expenses		$      17,100.00		$      1.12			$             26,284.00
Net Operating Income							$             28,656.00