Question
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the companys costs:
Fixed Cost per Month | Cost per Car Washed | ||||||
Cleaning supplies | $ | 0.80 | |||||
Electricity | $ | 1,200 | $ | 0.09 | |||
Maintenance | $ | 0.25 | |||||
Wages and salaries | $ | 4,400 | $ | 0.40 | |||
Depreciation | $ | 8,500 | |||||
Rent | $ | 2,000 | |||||
Administrative expenses | $ | 1,600 | $ | 0.04 | |||
For example, electricity costs should be $1,200 per month plus $0.09 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.60 per car washed.
The actual operating results for August are as follows:
Lavage Rapide | ||
Income Statement | ||
For the Month Ended August 31 | ||
Actual cars washed | 8,500 | |
Revenue | $ | 57,540 |
Expenses: | ||
Cleaning supplies | 7,220 | |
Electricity | 1,926 | |
Maintenance | 2,340 | |
Wages and salaries | 8,120 | |
Depreciation | 8,500 | |
Rent | 2,200 | |
Administrative expenses | 1,836 | |
Total expense | 32,142 | |
Net operating income | $ | 25,398 |
Required:
Prepare a flexible budget performance report that shows the companys 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.)
Lavage Rapide Flexible Budget Performance Report For the Month Ended August 31 Actual Results Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget Cars washed 8,500 10,000 Revenue $ 57,540 7,220 Expenses: Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent 1,926 2,340 8,120 8,500 2,200 Administrative expenses 1,836 Total expense 32,142 25,398 E Net operating income $
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