Lavage Rapide is a Canadian company that owns and operates a large automatic car

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 $1,200 per month plus $0.15 per car washed. The company actually washed 8,800 cars in August and collected an average of $4.90 per car washed.

Required:

Prepare the company’s flexible budget for August.

Lavage Rapide Flexible Budget For The Month Ended August 31

8,800

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.80 Electricity $ 1,200 $ 0.15 Maintenance $ 0.20 Wages and salaries $ 5,000 $ 0.30 Depreciation $ 6,000 Rent $ 8,000 Administrative expenses $ 4,000 $ 0.10

Explanation / Answer

Solution: Flexible Budget for August:

Actual Cars Washed 8,800 Particulars Amount ($) Revenue (8800*4.9) 43,120 Expenses: Cleaning supplies (8800*0.8) 7,040 Electricity [1200+(8800*0.15)] 2,520 Maintenance (8800*0.2) 1,760 Wages and salaries [5000+(8800*0.3)] 7,640 Depreciation 6,000 Rent 8,000 Administrative expense [4000+(8800*0.1)] 4,880 Total Expenses 37,840 Net Operating Income(43120-37840) 5,280

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