Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static-budget and actual results for June 2015 are provided below. Stevie has one employee who has been with him for all 10 years that he has been in business. He has not been as lucky with his second and third employees. Stevie is hiring new employees in those positions almost every second month. It usually takes 2 hours to detail a vehicle. It takes as long for the seasoned employee as for the new ones, as the former tends to put more into the job. Stevie pays his long-term employee $20 per hour and the other two employees $10 per hour. Stevie pays all employees for 2 hours of work on each car, regardless of how long the work actually takes them. There were no wage increases in June.

Required
1. Prepare a statement of the static-budget variances that Stevie would be interested in.
2. Compute any flexible-budget variances that you believe would be appropriate.
3. What information, in addition to that provided in the statements of comprehensive income, would you want Stevie to gather if you wanted to improve operational efficiency?
4. How many cars, on average, did Stevie budget for each employee? How many cars did they actually detail?
5. What advice would you give Stevie about motivating his employees?

Transcribed Image Text:

Lightning Car Detailing Actual and Budgeted Statement of Comprehensive Income For the Month Ending June 30, 2015 Budget Actual Cars detailed Revenue Variable costs: 225 $39,375 200 $30,000 1,500 5,600 7,100 22,900 9,500 $13,400 Costs of supplies Labour 2,250 6,000 8,250 31,125 9,500 S21,625 Total variable costs Contribution margin Fixed costs Operating income