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 $ 1,300 $ 0.07 Maintenance $ 0.15 Wages and salaries $ 4,700 $ 0.20 Depreciation $ 8,000 Rent $ 2,100 Administrative expenses $ 1,700 $ 0.02 For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company actually washed 8,500 cars in August and collected an average of $6.40 per car washed.

Required: Prepare the company’s flexible budget for August.

Answer 1

Ans.	LAVAGE RAPID
	Flexible Budget
	For the Month of August
	Cars	8,500
	Revenue	$54,400
	Expenses:
	Cleaning supplies	$4,250
	Electricity	$1,895
	Maintenance	$1,275
	Wages and salaries	$6,400
	Depreciation	$8,000
	Rent	$21,000
	Administrative expenses	$1,870
	Total expenses	$44,690
	Net operating income	$9,710
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain constant.
	*Calculation of Flexible Budget:
		Flexible Budget
	Cars	8,500
	Revenue	$6.40 * 8,500
	Expenses:
	Cleaning supplies	$0.50 * 8,500
	Electricity	$1,300 + ($0.07 * 8,500)
	Maintenance	$0.15 * 8,500
	Wages and salaries	$4,700 + ($0.20 * 8,500)
	Depreciation	$8,000
	Rent	$21,000
	Administrative expenses	$1,700 + ($0.02 * 8,500)

Answer 2