5. Lavado Rapido is a M exican company that owns and operates a large automatic

Question

5. Lavado Rapido is a M exican company that owns and operates a large automatic car wash facility City. The following table provides data concerning the company's costs: Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent $1.10 $0.20 $0.35 $0.80 1,500 6,500 6,000 9,500 3,500 ministrative expensers $0.20 For example, electricity cost are $1,500 per month plus $0.20 per car washed. The company expects to wash 10,000 cars in October and to collect an average of $5.50 per car washed. Required: Prepare the company's planning budget for October.

Explanation / Answer

Planning Budget for October Month =

Revenue from car wash = $55000

(10000 cars × $5.50)

Less- Costs

Cleaning Supplies (10000 cars × $1.10)= $11000

Electricity = $3500

[(10000 cars × $0.20) + $1500]

Maintainence (10000 units × $0.35) = $3500

Wages and salaries = $14500

[(10000 cars × $0.80) + $6500]

Depriciation = $6000

Rent = $9500

Administrative Expenses = $5500

[(10000 Cars × $0.20) + $3500]

Total costs = $53500

Profit = $1500

Note -

1. Electricity, Wages and salaries, Administrative Expenses are mixed costs, that is they have both fixed cost component and variable cost component. Fixed cost would remain same irrespective of change in activity.

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