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				$	0.70
Electricity	$	1,400		$	0.08
Maintenance				$	0.15
Wages and salaries	$	4,800		$	0.20
Depreciation	$	8,400
Rent	$	2,000
Administrative expenses	$	1,700		$	0.03

For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company actually washed 8,200 cars in August and collected an average of $6.00 per car washed.

Required:

Prepare the company’s flexible budget for August.

Answer 1

Fixed cost Per unit Variable Particulars Total Units (с) D%3 (B * C) 0.70 A D (A) (В) 5,740 $ 5,740 656 2,056 $ 1,230 1,230 $ 1,640 6,440 $ 8,400 $ 2,000 246 1,946 Cleaning supplies 8200 $ 1,400 $ $ 4,800 $ 8,400 $ 2,000 Administrative expense $1,700 Electricity 8200 0.08 Maintenance 8200 0.15 Wages and salaries 8200 0.20 $ $ $ Depreciation 8200 Rent 8200 $ 8200 0.03 S

Flexiable Budget For the month of August 31 Particulars Car washes Amount 8200 Revenue 49200 Expenses Cleaning supplies Electricity 5740 2056 1230 Maintenance Wages and salaries Depreciation Rent 6440 8400 2000 Administrative expense Total expenses Net operating income 1946 27812 21388