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 $1,300 Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses Cost per Car Washed $0.60 $0.12 $0.10 $0.40 $4,500 $8,300 $1,900 $1,400 $0.04 For example, electricity costs are $1,300 per month plus $0.10 per car washed. The company expects to wash 8.200 cars in August and to collect an average of $6.40 per car washed.

Answer 1

Ans.	LAVAGE RAPIDE
	Flexible Budget Performance Report
	For the Month Ended August 31
		Actual Results	Spending variance		Flexible Budget	Activity variance		Planning Budget
	Cars	8,300			8,300			8,200
	Revenue	$54,580	$1,460	F	$53,120	$640	F	$52,480
	Expenses:			U
	Cleaning supplies	$5,420	$440	U	$4,980	$60	U	$4,920
	Electricity	$2,090	$38	F	$2,130	$10	U	$2,120
	Maintenance	$1,060	$230	U	$830	$10	U	$820
	Wages and salaries	$8,140	$320	U	$7,820	$40	U	$7,780
	Depreciation	$8,300	$0	none	$8,300	$0	none	$8,300
	Rent	$2,100	$200	U	$1,900	$0	none	$1,900
	Administrative expenses	$1,628	$105	F	$1,732	$4	U	$1,728
	Total expenses	$28,738	$1,046	U	$27,692	$124	U	$27,568
	Net operating income	$25,842	$414	F	$25,428	$516	F	$24,912
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	*Calculation of Flexible & Planning budget:
		Flexible Budget	Planning Budget
	Cars	8,300	8,200
	Revenue	$6.40 * 8,300	$6.40 * 8,200
	Expenses:
	Cleaning supplies	$0.60 * 8,300	$0.60 * 8,200
	Electricity	$1,300 + ($0.10 * 8,300)	$1,300 + ($0.10 * 8,200)
	Maintenance	$0.10 * 8,300	$0.10 * 8,200
	Wages and salaries	$4,500 + ($0.40 * 8,300)	$4,500 + ($0.40 * 8,200)
	Depreciation	$8,300	$8,300
	Rent	$1,900	$1,900
	Administrative expenses	$1,400 + ($0.04 * 8,300)	$1,400 + ($0.04 * 8,200)
	*Increase in expenses from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget =   Favorable.
	Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in revenue or net operating income and decrease in expenses from flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from flexible budget to actual results =   Unfavorable.