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	$	1,200		$	0.15
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.30
Depreciation	$	6,000
Rent	$	8,000
Administrative expenses	$	4,000		$	0.10

For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 per car washed.
Required:

Prepare the company’s planning budget for August.

Answer 1

Planning Budget
Budgeted Cars washed	9000
Revenue	44100	=9000*4.9
Expenses:
Cleaning supplies	7200	=9000*0.8
Electricity	2550	=1200+(9000*0.15)
Maintenance	1800	=9000*0.2
Wages and salaries	7700	=5000+(9000*0.3)
Depreciation	6000
Rent	8000
Administrative expenses	4900	=4000+(9000*0.1)
Total expenses	38150
Net operating income	5950