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 $0.07 per car washed. The company actually washed 8,300 cars in August and collected an average of $6.00 per car washed.

Required:

Prepare the company’s flexible budget for August.

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.50 Electricity $ 1,200 $ 0.07 Maintenance $ 0.20 Wages and salaries $ 5,000 $ 0.30 Depreciation $ 8,400 Rent $ 2,000 Administrative expenses $ 1,700 $ 0.02

Explanation / Answer

Prepare the company’s flexible budget for August.

Revenue 49800 Expense Cleaning supplies 4150 Electricity 1781 Maintenance 1660 Wages and salaries 7490 Depreciation 8400 Rent 2000 Administrative expenses 1866 Total expense 27347 Net operating income 22453

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