Lavage Rapide is a Canadian company that owns and operates a large automatic car
ID: 2534950 • 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
Ans. Lavage Rapide Flexible Budget Performance Report For the Month Ended August 31 Actual Results Rev. & Spend. Variance Flexible budget Activity variance Planning budget Cars washed 8500 8500 8400 Revenue 59220 1420 F 57800 680 F 57120 Expenses: Cleaning supplies 5540 440 U 5100 60 U 5040 Electricity 1774 36 F 1810 6 U 1804 Maintenance 1920 220 U 1700 20 U 1680 Wages and salaries 7080 330 U 6750 30 U 6720 Depreciation 8500 0 no effect 8500 0 no effect 8500 Rent 2300 200 U 2100 0 no effect 2100 Admiinistrative expenses 1852 103 F 1955 3 U 1952 Total expense 28966 1051 U 27915 119 U 27796 Net operating income 30254 369 F 29885 561 F 29324 *Calculations for flexible budget & Planning budget: Flexible Planning Cars washed 8500 8400 Revenue 8500*6.80 8400*6.80 Expenses: Cleaning supplies 8500*0.60 8400*0.60 Electricity 1300+(8500*0.06) 1300+(8400*0.06) Maintenance 8500*0.20 8400*0.20 Wages and salaries 4200+(8500*0.30) 4200+(8400*0.30) Depreciation 8500 8500 Rent 2100 2100 Admiinistrative expenses 1700+(8500*0.03) 1700+(8400*0.03) *Revenue & Spending variance = Actual results - Flexible budget *Activity variance = Flexible budget - Planning budget *Increase in Revenue, operating income & decrease in expenses = Favorable *Decrease in Revenue, operating income & Increase in expenses = Unfavorable *Flexible budget is prepared on the basis of actual units (cars washed).
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