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				$	0.40
Electricity	$	1,500		$	0.09
Maintenance				$	0.25
Wages and salaries	$	4,500		$	0.30
Depreciation	$	8,000
Rent	$	2,100
Administrative expenses	$	1,400		$	0.04

For example, electricity costs are $1,500 per month plus $0.09 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.30 per car washed.

Required:

Prepare the company’s planning budget for August.

Answer 1

Solution

Lavage Rapide
Planning Budget
For the Month ended August 31
Revenue	$ 52,920.00
Expenses:
Cleaning supplies	$ 3,360.00
Electricity	$ 2,256.00
Maintenance	$ 2,100.00
Wages and salaries	$ 7,020.00
Depreciation	$ 8,000.00
Rent	$ 2,100.00
Administrative expenses	$ 1,736.00
Total Expenses	$ 26,572.00
Net Operating Income	$ 26,348.00

.

Working

	Units (A)	Fixed cost (B)	Variable cost per unit ©	Flexible cost and revenue (D=(A x C) +B)
Revenue	8400		$          6.30	$     52,920.00
Expenses:	8400
Cleaning suplies	8400		$          0.40	$       3,360.00
Electricity	8400	$    1,500.00	$          0.09	$       2,256.00
Maintenance	8400		$          0.25	$       2,100.00
Wages and salaries	8400	$    4,500.00	$          0.30	$       7,020.00
Depreciation	8400	$    8,000.00		$       8,000.00
Rent	8400	$    2,100.00		$       2,100.00
Administrative expenses	8400	$    1,400.00	$          0.04	$       1,736.00
Total Expenses				$     26,572.00
Net Operating Income				$     26,348.00