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	$	1,400		$	0.08
Maintenance				$	0.20
Wages and salaries	$	4,600		$	0.30
Depreciation	$	8,100
Rent	$	1,800
Administrative expenses	$	1,300		$	0.02

For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company expects to wash 8,400 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		8,500
Revenue	$	54,180
Expenses:
Cleaning supplies		7,220
Electricity		2,042
Maintenance		1,920
Wages and salaries		7,480
Depreciation		8,100
Rent		2,000
Administrative expenses		1,368
Total expense		30,130
Net operating income	$	24,050

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	8500			8500			8400
Revenue	54180	1480	F	52700	620	F	52080
Expenses:
Cleaning supplies	7220	420	U	6800	80	U	6720
Electricity	2042	38	F	2080	8	U	2072
Maintenance	1920	220	U	1700	20	U	1680
Wages and salaries	7480	330	U	7150	30	U	7120
Depreciation	8100	0	None	8100	0	None	8100
Rent	2000	200	U	1800	0	None	1800
Administrative expenses	1368	102	F	1470	2	U	1468
Total expenses	30130	1030	U	29100	140	U	28960
Net operating income	24050	450	F	23600	480	F	23120