Lavage Rapide is a Canadian company that owns and operates a large automatic car
ID: 2534595 • Letter: L
Question
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 $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.80 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 Costper Month Cost per
Car Washed Cleaning supplies $ 0.60 Electricity $ 1,300 $ 0.06 Maintenance $ 0.20 Wages and salaries $ 4,200 $ 0.30 Depreciation $ 8,500 Rent $ 2,100 Administrative expenses $ 1,700 $ 0.03
Explanation / Answer
Lavage Rapide Flexible Budget Performance Report For the month ended August 31, -----Flexible Budget---- Variable amount per unit Total fixed costs Actual ----Flexible Budget at ---- Planning Budget Variance Classification of variances Car Washed 8500 8500 8400 Sales 6.8 59220 57800 57120 1420 Favourable Revenue Expenses Cleaning supplies 0.6 5540 5100 5040 440 Unfavoruable Spending Electricity 0.06 1300 1774 1810 1804 -36 Favoruable Spending & Activity Maintenance 0.2 1920 1700 1680 220 Unfavoruable Spending Wages & Salaries 0.3 4200 7080 6750 6720 330 Unfavoruable Spending & Activity Depreciation 0 8500 8500 8500 8500 0 None Activity Rent 0 2100 2300 2100 2100 200 Unfavoruable Activity Administrative expenses 0.03 1700 1852 1955 1952 -103 Favoruable Spending & Activity Total expense 28966 27915 27796 1051 Unfavoruable Net Operating Income 30254 29885 29324 369 Favoruable
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