Repairs are done at the location of the problem (80% of which are on the QEW). If damage is too severe, or the problem is such that it cannot be taken care of immediately, the drivers tow the car to a location chosen by the vehicle owner.

The drivers of the trucks are considered independent contractors and are paid a set amount for each service incident that is completed on site (and nothing if they tow the vehicle, although they often receive tips from the vehicle owners and some repair shops offer "kickbacks" to tow trucks that bring in business). The firm owns the trucks, and pays for all repairs and maintenance, including gas. Customers are charged a flat fee if towing is necessary, and various fees if repairs are conducted on site. The firm budgets carefully for each month. Gas and repairs are budgeted on the basis of kilometers driven. The static budget variances for September, 2020 were as follows:

Budget Actual Variance

Service Calls 22,500 23,630 1,130F

Completed on site 20,250 19,020 1,230U

Towed 2,250 4,610 2,360U

Kilometers driven 472,500 638,000 165,500U

Revenue (from repairs) $13,162,500 $11,386,200 $1,776,300U

Revenue (from towing) 450,000 922,000 472,000F

Variable costs:

Gas 56,700 69,200 12,500U

Parts 911,250 890,600 20,650F

Payments to drivers 2,632,500 2,472,600 159,900F

Fixed costs

Salaries 82,000 80,000 2,000U

Depreciation on trucks 950,000 950,000 ---

Refer to the problem / numbers above for flexible budgeting. Think about what might have caused the important variances. Make one clear recommendation to management. Remember that your recommendation can always be that no changes be implemented.