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The Rescuers, Ltd. operates a fleet of trucks which locate and/or respond to calls from disabled cars or accidents. Repairs are down at the location

The Rescuers, Ltd. operates a fleet of trucks which locate and/or respond to calls from disabled cars or accidents. Repairs are down at the location of the problem (9-% 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 repair facility 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 us completed on site (and nothing is they tow the vehicle, although they often receive tips from the vehicle owners and some repair ship offer "kickbacks" to tow trucks that bring in business). The firm owns the trucks, and pays for all repairs and maintenance, including gas. The firm budgets carefully for each month. Customers are charged a flat fee if towing is necessary, and various fees is raids are conducted on site. Gas and repairs are budgeted on the basis of kilometres driven. The static budget variances for March, 2018 were as follows:

Budget Actual Variance
Service calls 18,000 18,240 240F
Completed onsite 13,500 12,979 521U
Towed 4,500 12,979 761U
Kilometers driven 234,000 269,800 35,800U
Revenue (from repairs) $11,475,000 $10,386,200 $1,088,800U
Revenue (from towing) 675,000 789,150 91,800F
Variable costs:
Gas 51,480 67,400 15,920
Parts 1,147,500 920,600 226,900F
Payments to drivers 2,430,000 2,336,220 66,960F
Maintenance for trucks 538,200 493,400 44,800F
Fixed costs
Salaires 70,000 75,000 5,000U
Amortization on trucks 950,000 950,000 -

1. Prepare a flexible budget analysis for The Rescuers for the month of February. Be sure to include the activities levels

2. Examine the solution to the flexible budget. Do you find any indication of a problem that the firms management should address? Be specific about what may be wrong. Note: there could easily be more than one problem.

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