Question

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash 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 $ 0.06 $ 0.25 $ 0.30 $4,500 $8,200 $2,000 $1.300 $ 0.04 For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.10 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8.100 Revenue $50 900 Expenses Cleaning supplies 6.900 Electricity 1.750 Maintenance 2.240 Wages and salaries 7260 Depreciation 8.200 Rent 2 200 Administrative expenses 1520 Total expense 30.070 Net operating income $20,830 Required: Complete the flexible budget performance report that shows the company's activity variances and revenue and spending variances for August (indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (Le, zero variance). Input all amounts as positive values.)

Answer 1

Flexible budget is made at the actual level of activity whereas planning budget is made at the expected level of activity Revenue and spending variances are the difference between the actual results and the flexible budget whereas Activity variance are the difference between Lavage rapide Flexible Calculation ( 8100 Activity Calculation ( 8000 Planning cars ) budget Variance cars) 8100 cars) budget 8100 * 6.1 49,410 -610 F 8000 * 6.1 48,800 Revenue Expenses :- Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative Exp. Total expense Net operating Income 8100 * 0.8 1300 + 8100 * 0.06 8100 * 0.25 4500 + 8100 * 0.3 6,480 1786 2025 6930 8200 2000 1624 29,045 20,365 -80 U -6 U -25 U -30 U 0 8000 * 0.8 1300 + 8000 * 0.06 8000 * 0.25 4500 + 8000 * 0.3 6,400 1780 2000 6900 8200 2000 1620 28,900 19,900 1300 + 8100 * 0.04 1300 + 8000 * 0.04 -4 U -145 U -465 F Flexible Budget Performance Reoprt Revenue Actual results and 8100 Cars) Flexible budget spending Variances 50900 -1,490F 49,410 6,480 1786 Revenue Expenses :- Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative Exp. Total expense • Net operating Income 2025 6930 6,900 1,750 2,240 7,260 8,200 2,200 1,520 30,070 20,830 -420 U 36 F -215 U -330 U 0 -200 U -1,129 U -1,025 U -465 F 8200 2000 1624 29,045 20,365 Input all amounts as positive values. Negative value are used for better explanation purpose. The answers are highlighted in yellow colour.