Lavage Rapide is a Canadian company that owns and operates a large automatic car

Question

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash 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 $ 1,400 $ 0.06 Maintenance $ 0.20 Wages and salaries $ 4,000 $ 0.30 Depreciation $ 8,100 Rent $ 2,200 Administrative expenses $ 1,400 $ 0.04 For example, electricity costs are $1,400 per month plus $0.06 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.40 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 $ 55,220 Expenses: Cleaning supplies 3,820 Electricity 1,868 Maintenance 1,900 Wages and salaries 6,850 Depreciation 8,100 Rent 2,400 Administrative expenses 1,632 Total expense 26,570 Net operating income $ 28,650 Required: Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending 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.)

Explanation / Answer

Preparation of three budgets according to question

Activity variance;

For revenue=flexible-planned

For expenses=planned-flexible

Revenue and spending variance;

For revenue=actual-flexible

For spending=flexible-actual

flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August

.

Actual flexible planned No of cars 8400 8400 8300 Revenue 55220 53760(8400*6.4) 53120(8300*6.4) Expenses; Cleaning supplies 3820 3360(8400*.40) 3320(8300*.40) Electricity 1868 1904(1400+8400*.06) 1898(1400+8300*.06) Maintenance 1900 1680 1660 Wages & salaries 6850 6520 6490 Depreciation 8100 8100 8100 Rent 2400 2200 2200 Administration expenses 1632 1736 1732 Total expenses 26570 25500 25400 Net operating income 28650 28260 27720

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