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	$	1,100		$	0.08
Maintenance				$	0.25
Wages and salaries	$	4,300		$	0.20
Depreciation	$	8,400
Rent	$	1,900
Administrative expenses	$	1,600		$	0.04

For example, electricity costs are $1,100 per month plus $0.08 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.10 per car washed.

Required:

Prepare the company’s planning budget for August.

Revenue

Expenses:

Cleaning Supplies

Electricity

Maintanence

Wages and Salaries

Depreciation

Rent

Adminsitrative expenses

Total expense

Net operating income

Answer 1

ANSWER

Planning Budget
Budgeted Cars washed	8,500
Revenue	51,850	=8,500*6.10
Expenses:
Cleaning supplies	6,800	=8,500 *0.8
Electricity	1,780	=1,100 +(8,500 *0.08)
Maintenance	2,125	=8,500 *0.25
Wages and salaries	6,000	=4,300+(8,500 *0.20)
Depreciation	8,400
Rent	1,900
Administrative expenses	1,940	=1600+(8,500*0.04)
Total expenses	28,945
Net operating income	22,905

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