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				$	0.50
Electricity	$	1,400		$	0.07
Maintenance				$	0.15
Wages and salaries	$	4,400		$	0.20
Depreciation	$	8,200
Rent	$	1,900
Administrative expenses	$	1,600		$	0.01

For example, electricity costs are $1,400 per month plus $0.07 per car washed. The company actually washed 8,600 cars in August and collected an average of $5.90 per car washed.

Required:

Prepare the company’s flexible budget for August.

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:

Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q)		400
Revenue ($400.00q)	$	160,000
Expenses:
Wages and salaries ($12,000 + $120.00q)		60,000
Supplies ($6.00q)		2,400
Equipment rental ($2,300 + $24.00q)		11,900
Insurance ($3,800)		3,800
Miscellaneous ($540 + $1.42q)		1,108
Total expense		79,208
Net operating income	$	80,792

During May, the company’s actual activity was 390 diving-hours.

Required:

Prepare a flexible budget for May. (Round your answers to the nearest whole dollar.)

Answer 1

Answer

	CALCULATION						Flexible Budget
Driving Hours							390
Revenues				$ 400.00			$           156,000.00
Expenses:
Wages & Salaries	(	$      12,000.00	)	$ 120.00	x 390		$             58,800.00
Supplies	(	$                      -	)	$      6.00	x 390	)	$               2,340.00
Equipment rentals	(	$         2,300.00	+	$    24.00	x 390	)	$             11,660.00
Insurance	(	$         3,800.00	+	$           -	x 390	)	$               3,800.00
Miscellaneous	(	$            540.00	+	$      1.42	x 390		$               1,093.80
Total Expenses		$      18,640.00		$ 151.42			$             77,693.80
Net Operating Income							$             78,306.20