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

ID: 2482488 • Letter: L

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 $ 0.80 Electricity $ 1,100 $ 0.05 Maintenance $ 0.25 Wages and salaries $ 4,200 $ 0.30 Depreciation $ 8,300 Rent $ 2,100 Administrative expenses $ 1,800 $ 0.03 For example, electricity costs are $1,100 per month plus $0.05 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.30 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,200 Revenue $ 53,130 Expenses: Cleaning supplies 6,980 Electricity 1,475 Maintenance 2,265 Wages and salaries 6,990 Depreciation 8,300 Rent 2,300 Administrative expenses 1,943 Total expense 30,253 Net operating income $ 22,877 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

Data as given is as follows:

Flexible budget is prepared as under:

Lavage Rapide Income Statement For the Month Ended August 31 Static Budget Flexible Budget   Actual cars washed 8,200 8,100 8,200   Revenue 53,130 51,030 51660   Expenses:      Cleaning supplies 6,980 6480 6560      Electricity 1,475 1505 1524      Maintenance 2,265 2025 2050      Wages and salaries 6,990 6630 6712      Depreciation 8,300 8300 8402      Rent 2,300 2100 2126      Administrative expenses 1,943 2043 2068   Total expense 30,253 29083 29442   Net operating income 22,877 21,947 22218