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 $ 0.70 Electricity $ 1,100 $ 0.06 Maintenance $ 0.20 Wages and salaries $ 4,000 $ 0.20 Depreciation $ 8,300 Rent $ 2,200 Administrative expenses $ 1,700 $ 0.04 For example, electricity costs are $1,100 per month plus $0.06 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.40 per car washed. Complete the company’s planning budget for August.

Explanation / Answer

Planning budget specifies what a company expects in future about its incomes and expenses. These are based on past experiences and past records and future expectations

Cost budget for month of august can be prepared as Number of cars expected = 8200 cars Fixed element Variable element Variable cost Total cost on Calculated by adding per month per car washed on 8200 cars 8200 cars Variable cost+ fixed cost Cleaning supplies 0.70 5740 5740 (5740+0) Electricity 1100 0.06 492 1592 (492+1100) Maintenance 0.20 1640 1640 (1640+0) Wages and salaries 4000 0.20 1640 5640 (1640+4000) Depreciation 8300 8300 (0+8300) Rent 2200 2200 (0+2200) Administrative expense 1700 0.04 328 2028 (328+1700) Total cost for month of August 17300 9840 27140 Expected Collection on 8200 cars = 8200 cars x 6.40 per car 52480 Less: Total expected cost on cars washed 27140 Expected net income 25340

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