Question

Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 1.10 Electricity $ 2,400 0.50 Maintenance 0.70 Wages and salaries 5,700 0.80 Depreciation 9,300 Rent 3,100 Administrative expenses 2,800 0.04 The company expects to charge customers an average of $8.80 per car washed. Required: Prepare a flexible budget for October assuming either 6,500 or 7,500 cars are washed.

Answer 1

Solution: Auto Lavage Flexible budget for 6,500 cars washed

Revenue	$
Expenses:	$57,200
Cleaning supplies	7,150
Electricity ($2,400 + 6,500*$0.50)	5,650
Maintenance	4,550
Wages and salaries	10,900
Depreciation	9,300
Rent	3,100
Administrative expenses	3,060
Total expense	$43,710
Net operating income	$13,490