Exercise 9-14 Prepare a Flexible Budget Performance Report [LO9-4] Lavage Rapide

Question

Exercise 9-14 Prepare a Flexible Budget Performance Report [LO9-4]

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:

For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August appear below.

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity 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.)

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.40 Electricity $ 1,300 $ 0.07 Maintenance $ 0.20 Wages and salaries $ 4,800 $ 0.30 Depreciation $ 8,400 Rent $ 1,800 Administrative expenses $ 1,600 $ 0.05

Explanation / Answer

Flexible budget Actual Revenue and spending variances Cars washed 8600 8600 Revenue 51600 53100 1500 F Expenses: Cleaning supplies 3440 3900 460 U Electricity 1902 1865 37 F Maintenance 1720 1940 220 U Wages and salaries 7380 7710 330 U Depreciation 8400 8400 0 None Rent 1800 2000 200 U Administrative expenses 2030 1925 105 F Total expenses 26672 27740 1068 U Net operating income 24928 25360 432 F

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