Question
Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the companys
Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the companys expected costs:
Fixed Cost per Month | Cost per Car Washed | |||||
Cleaning supplies | $ | 0.60 | ||||
Electricity | $ | 3,250 | 0.20 | |||
Maintenance | 0.40 | |||||
Wages and salaries | 6,400 | 0.50 | ||||
Depreciation | 10,000 | |||||
Rent | 3,800 | |||||
Administrative expenses | 3,520 | 0.05 | ||||
For example, electricity costs are $3,250 per month plus $0.20 per car washed. The company expects to wash 9,700 cars in October and to collect an average of $7.60 per car washed.
Auto Lavages actual level of activity was 9,800 cars. The actual revenues and expenses for October are given below:
Auto Lavage Income Statement For the Month Ended October 31 | ||
Actual cars washed | 9,800 | |
Sales | $ | 77,600 |
Variable expenses: | ||
Cleaning supplies | 6,600 | |
Electricity | 2,035 | |
Maintenance | 3,500 | |
Wages and salaries | 5,102 | |
Administrative | 580 | |
Fixed expenses: | ||
Electricity | 3,320 | |
Wages and salaries | 6,400 | |
Depreciation | 10,000 | |
Rent | 3,800 | |
Administrative | 3,445 | |
Total expense | 44,782 | |
Net operating income | $ | 32,818 |
Required:
1. Prepare a flexible budget performance report for October. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
2. Prepare a comprehensive performance report for October. Assume that the static budget for October was based on an activity level of 9,700 cars. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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