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 $1,000 per month plus $0.05 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.90 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 $ 0.70 Electricity $ 1,000 $ 0.05 Maintenance $ 0.15 Wages and salaries $ 4,400 $ 0.30 Depreciation $ 8,500 Rent $ 2,100 Administrative expenses $ 1,500 $ 0.03

Explanation / Answer

Flexible budget Actual Revenue and spending variances Cars washed 8500 8500 Revenue 58650 60060 1410 F Expenses: Cleaning supplies 5950 6380 430 U Electricity 1425 1390 35 F Maintenance 1275 1500 225 U Wages and salaries 6950 7280 330 U Depreciation 8500 8500 0 None Rent 2100 2300 200 U Administrative expenses 1755 1652 103 F Total expenses 27955 29002 1047 U Net operating income 30695 31058 363 F

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