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	$	1,200		$	0.05
Maintenance				$	0.30
Wages and salaries	$	4,500		$	0.20
Depreciation	$	8,000
Rent	$	2,200
Administrative expenses	$	1,500		$	0.04

For example, electricity costs are $1,200 per month plus $0.05 per car washed. The company expects to wash 8,400 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		8,500
Revenue	$	53,340
Expenses:
Cleaning supplies		4,700
Electricity		1,590
Maintenance		2,760
Wages and salaries		6,540
Depreciation		8,000
Rent		2,400
Administrative expenses		1,736
Total expense		27,726
Net operating income	$	25,614

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.)

Lavage Rapide Flexible Budget Performance Report For the Month Ended August 31 Actual Results Activity Variances Flexible Budget Activity Variances Planning Budget Cars washed 8,500 Revenue $53,340 Expenses: Cleaning supplies 4,700 Electricity 1,590 Maintenance 2,760 Wages and salaries 6,540 Depreciation 8,000 Rent 2,400 Administrative expenses 1,736 Total expense 27,726 Net operating income $25,614

Answer 1

Lavage Rapide Flexible budget performance report For the month ended August 31 Revenue and spending variances Flexible budget 8500 Activity Variances Planning Budget Actual Results 8500 Cars Washed 8400 53,340 $ 1,490 F $ 51,850 $ 610 F 51,240 Revenues Expenses : Cleaning supplies Electricity Maintenance Wages and salaries Depreciation 4,700 $ 1,590 $ 2,760 $ 6,540 $ 8,000 $ 2,400 $ 1,736 $ 27,726 $ 25,614 $ 450 US 35 F $ 210 U S 340 U - None $ 200 U 104 F $ 1,061 U $ 4,250 $ 1,625 $ 2,550 $ 6,200 $ 8,000 $ 2,200 $ 1,840 $ 26,665 $ 25,185 $ 50 U 5 U 30 U 20 U - None - None 4 U 109 U 501 F 4,200 1,620 2,520 6,180 8,000 2,200 1,836 26,556 24,684 $ Administrative expense Total expenses Net operating income $ 429 F For revenues, If actual fig < Flexible fig For revenues, if flexible fig > Planning Fig U F For expense, If Actual fig < flexible Fig Vice versa For expense, if flexible fig > Planning Fig Vice versa U