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 $ 1,100 $ 0.09 Maintenance $ 0.15 Wages and salaries $ 4,100 $ 0.20 Depreciation $ 8,300 Rent $ 2,100 Administrative expenses $ 1,700 $ 0.05 For example, electricity costs are $1,100 per month plus $0.09 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.70 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,400 Revenue $ 57,710 Expenses: Cleaning supplies 7,140 Electricity 1,817 Maintenance 1,485 Wages and salaries 6,120 Depreciation 8,300 Rent 2,300 Administrative expenses 2,015 Total expense 29,177 Net operating income $ 28,533 Required: Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Answer-

LAVAGE RAPIDE
FLEXIBLE BUDGET PERFORMANCE REPORT
FOR THE MONTH ENDED AUGUST 31
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	1430	Favorable	670	Favorable
Less:-Expenses
Cleaning expenses	-420	Unfavorable	-80	Unfavorable
Electricity	39	Favorable	-9	Unfavorable
Maintenance	-225	Unfavorable	-15	Unfavorable
Wages & salaries	-340	Unfavorable	-20	Unfavorable
Depreciation	0	None	0	None
Rent	0	Unfavorable	0	None
Administrative expenses	105	Favorable	-6	Unfavorable
Total Expenses	-841	Unfavorable	-130	Unfavorable
Income from operations	589	Favorable	540	Favorable

Explanation-

Lavage Rapide
Revenue & Spending Variances
For the month ended August 31
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	8400 car washed*$6.70 per car washed	56280	57710	1430	Favorable
Less:-Expenses
Cleaning expenses	8400 car washed*$0.80 per car washed	6720	7140	-420	Unfavorable
Electricity	(8400 car washed*$0.09 per car washed)+$1100	1856	1817	39	Favorable
Maintenance	8400 car washed*$0.15 per car washed	1260	1485	-225	Unfavorable
Wages & salaries	(8400 car washed*$0.20 per car washed)+$4100	5780	6120	-340	Unfavorable
Depreciation		8300	8300	0	None
Rent		2300	2300	0	Unfavorable
Administrative expenses	(8400 car washed*$0.05 per car washed)+$1700	2120	2015	105	Favorable
Total expenses		28336	29177	-841	Unfavorable
Income from operations		27944	28533	589	Favorable
Lavage Rapide
Activity Variance
For the month ended August 31
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	8300 car washed*$6.70 per car washed= 55610	56280	670	Favorable
Less:-Expenses
Cleaning expenses	8300 car washed*$0.80 per car washed= 6640	6720	-80	Unfavorable
Electricity	(8300 car washed*$0.09 per car washed)+$1100= 1847	1856	-9	Unfavorable
Maintenance	8300 car washed*$0.15 per car washed= 1245	1260	-15	Unfavorable
Wages & salaries	(8300 car washed*$0.20 per car washed)+$4100= 5760	5780	-20	Unfavorable
Depreciation		8300	0	None
Rent		2300	0	None
Administrative expenses	(8300 car washed*$0.05 per car washed)+$1700= 2114	2120	-6	Unfavorable
Total Expenses	28206	28336	-130	Unfavorable
Income from operations	27404	27944	540	Favorable