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 $ 0.80 $ 0.10 $ 0.10 $ 0.30 $ 4, 500 $8,300 $ 1,900 $ 1,300 $ 0.04 For example, electricity costs are $1,300 per month plus $0.10 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.00 per car washed. The actual operating results for August appear below.

Answer 1

Ans.	LAVAGE RAPIDE
	Flexible Budget Performance Report
	For the Month Ended August 31
		Actual Results	Revenue & Spending variance		Flexible Budget	Activity variance		Planning Budget
	Cars	8,400			8,400			8,200
	Revenue	$51,900	$1,500	F	$50,400	$600	F	$49,800
	Expenses:
	Cleaning supplies	$7,140	$420	U	$6,720	$80	U	$6,640
	Electricity	$2,100	$38	F	$2,140	$10	U	$2,130
	Maintenance	$1,070	$230	U	$840	$10	U	$830
	Wages and salaries	$7,350	$3,330	U	$4,020	$30	U	$3,990
	Depreciation	$8,300	$0	none	$8,300	$0	none	$8,300
	Rent	$2,100	$200	U	$1,900	$0	none	$1,900
	Administrative expenses	$1,532	$105	U	$1,384	$1	U	$1,383
	Total expenses	$29,592	$4,288	U	$25,304	$131	U	$25,173
	Net operating income	$22,308	$2,788	U	$25,096	$469	F	$24,627
	*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	8,400	8,300
	Revenue	$6 * 8,400	$6 * 8,300
	Expenses:
	Cleaning supplies	$0.80 * 8,400	$0.80 * 8,300
	Electricity	$1,300 + ($0.10 * 8,400)	$1,300 + ($0.10 * 8,300)
	Maintenance	$0.10 * 8,400	$0.10 * 8,300
	Wages and salaries	$1,500 + ($0.30 * 8,400)	$1,500 + ($0.30 * 8,300)
	Depreciation	$8,300	$8,300
	Rent	$1,900	$1,900
	Administrative expenses	$1,300 + ($0.01 * 8,400)	$1,300 + ($0.01 * 8,300)
	*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.